Question

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

Answer 1

B.

Step-by-step explanation:

Hudson should prioritize paying down his credit card debt with a 19.7% interest rate most quickly using his increased pay to minimize the amount of interest he'll pay over the lifetime of his debts. Credit card debt typically carries much higher interest rates compared to other forms of debt, such as car loans or student loans. By paying down the high-interest credit card debt first, Hudson can reduce the total interest he accrues and work towards becoming debt-free more efficiently. So, the correct choice is:

B) His credit card with a 19.7% interest rate.