Hudson always makes the minimum monthly payments on all of his debts, on time. He receives a raise at work which gives him an extra $250 per month in take-home pay. If his primary goal is to minimize the amount of interest he'll pay over the lifetime of his debts, which debt should he pay down most quickly using his increased pay?* His car loan with a 6.9% interest rate His credit card with a 19.7% interest rate His private student loans with an 11.8% interest rate His Federal student loans with a 3.76% interest rate " Which debt should Hudson prioritize paying down most quickly using his increased pay to minimize the amount of interest he'll pay over the lifetime of his debts? A) His car loan with a 6.9% interest rate B) His credit card with a 19.7% interest rate C) His private student loans with an 11.8% interest rate D) His Federal student loans with a 3.76% interest rate
B) His credit card with a 19.7% interest rate
To determine which debt Hudson should prioritize paying down most quickly using his increased pay, we need to compare the interest rates of each debt. The higher the interest rate, the more interest he will pay over the lifetime of the debt.
Here are the interest rates of each debt:
A) Car loan - 6.9%
B) Credit card - 19.7%
C) Private student loans - 11.8%
D) Federal student loans - 3.76%
Based on the interest rates, Hudson should prioritize paying down the debt with the highest interest rate. In this case, that would be:
B) His credit card with a 19.7% interest rate.
By paying down the credit card with the increased pay, Hudson will be able to minimize the amount of interest he'll pay over the lifetime of the debts.
To determine which debt Hudson should prioritize paying down most quickly using his increased pay, we need to consider the interest rates of each debt. The higher the interest rate, the more interest he will accumulate over time.
Here are the interest rates for Hudson's debts:
A) Car loan with a 6.9% interest rate
B) Credit card with a 19.7% interest rate
C) Private student loans with an 11.8% interest rate
D) Federal student loans with a 3.76% interest rate
To find out which debt Hudson should prioritize, we can compare the interest rates and choose the one with the highest interest rate. This is because paying off the debt with the highest interest rate will save him the most money in interest payments over the lifetime of his debts.
In this case, the debt with the highest interest rate is Hudson's credit card with a 19.7% interest rate. Therefore, he should prioritize paying down his credit card debt most quickly using his increased pay.
Answer: B) His credit card with a 19.7% interest rate.