Quote:
Originally Posted by Orgazmo
Your money is tied up either way. Would it not be better to have it be tied up in two separate loans with an average rate lower than the rate of just the higher loan?
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The idea is that once a loan is paid off, the money IS NOT tied up.
Example:
You have two loans
$1000 with $50 payment
and
$2000 with $100 payment
and you have $1000 cash to blow at one of these loans.
If you pay off the first loan, you have $50 less tied up in payments each month.
If you pay down the second, you still have $150 tied up in payments each month.
The whole debt snowball thing is more about having less money tied up, realizing that your life is easier with that extra cash flow, then you get re-excited about tackling the next largest debt, with the eventual goal of having $0 tied up in payments and keeping it that way.