Hi all,
I’m getting a settlement from a hit and run accident I was involved in last year. I want to make the most of the settlement (take home will be about 10-12k after lawyer takes their cut). Currently my loan balance is around $82k with monthly payments being $700. I hate how much of each payment goes towards interest so what is the best way I can use this money to apply the most amount to principal?
I was thinking about making my normal monthly payment and then making my big lump sum payment
How to make the most of a settlement towards my student loans
byu/rick_c_0911 inStudentLoans
Posted by rick_c_0911
2 Comments
This might be an unpopular opinion, but use most of the money to make your life better. You only won 1/8 of your loans, thats not life-changing, but something else you can get for 10k could be life-changing for you. I guess it depends on what kind of circumstances youre in. Im thinking like, maybe youre having trouble affording medication, or your car really needs work, something important.
For me, I can allocate money to a specific loan. So I do the avalanche method (I think thats what its called), and pay the highest interest loan first.
You will minimize total interest paid by allocating extra payments to the loan with the highest interest rate. The sooner you pay off a loan, the sooner interest stops accruing on it.
Federal student loans have simple daily interest. By law, payments are allocated first to fees, then to interest, then to principal.
Make your minimum monthly payment. Then allocate the $10k to the loan with the highest interest rate.
As an aside, are you on the payment plan that gives you the lowest minimum monthly payment?