So now that I’ve got some good data compiled of my trip through debt reduction, let me demonstrate the power of piling on and attacking a single debt with all you have.
Over the past twelve months, I’ve been attacking my med school loans and been paying minimums on my business school loans, biding my time until the med school loans are paid off and I can attack them next. In the interests of full disclosure, the business school loans have a slightly higher interest rate (6.55% vs. 5.125%), but it makes little difference for this comparison.
End of July 2013 med school loans total balance: $33,615.23
End of July 2014 med school loans total balance: $7,518.90
Med school loans balance paid of from July 2013 to July 2014: $26,096.33
Total payments made on med school loans from July 2013 to July 2014: $27,268.68
Percentage of payments to balance: 95.70%
Percentage of payment to interest: 4.30%
End of July 2013 business school loan #2 balance: $35,310.27
End of July 2014 business school loan #2 balance: $34,633.05
Business school loan balance paid off from July 2013 to July 2014: $677.22
Total payments made on business school loans from July 2013 to July 2014: $2862.00
Percentage of payments to balance: 23.66%
Percentage of payments to interest: 76.34%
That is an ENORMOUS difference. Less than 5% of my payments for my med school loans have gone to interest because I pay the interest off and then throw as much as I can against the principal each and every month. Paying the minimums on the business school loan is only paying off the interest and a very small amount of principal. Over 75% of the minimum payment goes only to interest!
Bottom line: To get out of debt without wasting your hard earned cash, pile on and attack a single debt with everything you have.
Six Figures, Five Years 