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No. of Recommendations: 11
What is the loan payoff fund?

AJ is correct. It's extra monies set aside in a savings account. When it's equal to the value of one of my loans, I'll use it to pay the loan off, and snowball that loan's normal payment into the Loan Payoff fund (plus extra monies) to tackle the next loan on the list.

I used to put extra monies straight to the loan as soon as possible in order to minimize total interest. But then inevitably a costly emergency would come along that would overwhelm my emergency fund, so I'd have to borrow money to pay the bill. Now I let my Loan Payoff fund double as a second emergency fund until it's balance is sufficient to pay something off in full.

Right now it's large enough to pay off Student Loan 2, but that's my lowest rate loan, and it would only free up approx $50/month. If luck is with me, I'll have enough in the Loan Payoff fund at the end of this month to pay off the A/C Loan in full. The rate on that loan is twice as high and would free up $200/month. That feels like a better bang for the buck.
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