Does doing a debt snowball make sense in this situation?

[Skywise]

We finally sat down and made up a list of all our debts. If we follow the debt snowball advice from people like Dave Ramsey and Mary Hunt to go smallest to largest, then the debts that would be paid off first are the ones with no interest rate, and the debt to paid off last is the only one with an interest rate. Our debt is money owed to my brother, BIL, MIL and my student loan. The two smallest amounts are owed to our brothers and they don't care if we pay them back or not. BIL didn't even know we owed him any money. So does it make sense to work from smallest to largest when MIL needs the money much more than our brothers, and my student loan is accruing interest? My student loan is twice the amount of what we owe to our family.

[Denvergirlie]

Seeing that it's family that you owe money too... My answer would be a resounding yes.

However, perhaps you could "split" some of those payments? 1/2 to family, 1/2 to student loan.

Student loan interest should be deductable on your taxes anyways, so that wouldn't influence me to pay that off before family.

[mightymoo]

The reason they recommend you go with the smallest debt is so that you will feel like you are making progress and will stick with it. If it doesn't make sense to you, then just do it the way that does.

[Kyamo]

I think they give the advice to do small loans first only because it is motivating. If you go purely by the numbers, it makes the most sense to go from highest to lowest interest rate. It depends on the person which to choose - how likely you are to fall off the saving wagon, how helpful the small-debt payoff is to your motivation, etc.

I am paying my debts off in order from highest to lowest interest rates, in general. However, I make an exception for no-interest family loans. I am not going to leave the loan from my grandfather till last, because even though it isn't costing ME any interest, he is losing out on all the interest he could be gaining if he still had that money, and I feel bad about that. I would bump it even higher on the list if he needed the money, which he doesn't.

[Skywise]

Originally Posted by Denvergirlie

However, perhaps you could "split" some of those payments? 1/2 to family, 1/2 to student loan.

Student loan interest should be deductable on your taxes anyways, so that wouldn't influence me to pay that off before family.

I may split it up. I forgot about deducting the interest on our taxes.

Originally Posted by mightymoo

The reason they recommend you go with the smallest debt is so that you will feel like you are making progress and will stick with it. If it doesn't make sense to you, then just do it the way that does.

I can see how it would be motivating to get rid of the smaller debt. I just really really hate my student loan .

Originally Posted by Kyamo

I am paying my debts off in order from highest to lowest interest rates, in general. However, I make an exception for no-interest family loans. I am not going to leave the loan from my grandfather till last, because even though it isn't costing ME any interest, he is losing out on all the interest he could be gaining if he still had that money, and I feel bad about that. I would bump it even higher on the list if he needed the money, which he doesn't.

I didn't think about the interest that family members could potentially be missing out on. Thanks.

[llamalluv]

Originally Posted by Skywise

We finally sat down and made up a list of all our debts. If we follow the debt snowball advice from people like Dave Ramsey and Mary Hunt to go smallest to largest, then the debts that would be paid off first are the ones with no interest rate, and the debt to paid off last is the only one with an interest rate. Our debt is money owed to my brother, BIL, MIL and my student loan. The two smallest amounts are owed to our brothers and they don't care if we pay them back or not. BIL didn't even know we owed him any money. So does it make sense to work from smallest to largest when MIL needs the money much more than our brothers, and my student loan is accruing interest? My student loan is twice the amount of what we owe to our family.

Personally, I would pay the money back to family and friends first, even if it violated the rules of any debt snowball. It can only improve your relationships with your brothers and MIL and it will show them that if they loan you money, you will pay it back, and should you need help again in the future, they will be more likely to step in and offer help, even non-monetary help.

[Jenelle]

I would definitely pay back family members first. I can tell you from experience, that money between family can create a lot of issues. I have NEVER wanted anyone in my life to be thinking at Christmas -- "Nice sweater. Wonder how much that cost her? Hmph." If you don't owe anyone money, then who cares what they think about your sweater?

[Delicateflower]

I would pay your MIL first, then the other family loans, and the commercial loan last. You have a moral obligation to pay family back first, starting with those who need it most.

[Girl In The Fire]

Definitely pay back family first, you dont want to ruin your relationships over money. You don't see your student loans at Christmas and Thanksgiving .

I would pay back your MIL first but let your other family members know that you are paying MIL off first because she needs the money but they are next in line. I would also give them some kind of time line for the repayment and make sure you stick to it. This would hopefully avoid any kind of hurt feelings or bad blood if they find out you are paying MIL back and wonder why you are not paying them back.