What should I do First?
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|Tue, 04-21-2009 - 3:45pm|
Currently I have 2 credit card accounts and 1 personal loan account that I need to tackle.
The first is a Business credit card. The balance on the card is $27,000. Credit Limit is $28,000. The interest rate is fixed at 7.99%. I use this card for my business and some personal charges. My business charges $1500 - $4000 per month on this card. My business pays the payment and it’s portion of the interest on the card. I slowly pay my portion, $18,000, of the balance when I can. However since the business pays this account every month, I tend to let it slide.
My second credit card was used to consolidate a Balance transfer this was used by my second business startup. It has a fixed rate of 4.99%. The Balance is $24,000. Credit limit is $25,500. I pay $500 per month on that account. This account is paid by my second business account when the second business can afford to make the payments. (ie: most of the time)
The third account is an unsecured personal loan I used for my daughters college. The payment is fixed at $452. It has a remaining balance of $23500. I pay $475 per month on this account.
Here are my questions. I have a total of $31000.00 in Cash, earning about 2.5%. This is my total cash including any money that should be used for an emergency fund. I want to know how I should tackle this debt. Since my business uses the first card every month and the balance will never be zero, am I best leaving that account balance for last? Also, is $1000.00 enough of emergency fund in this economy.
I realize the second credit card has the lowest interest rate, but I have discarded the card associated with that account and once it is paid off, I don’t plan on using it again.
Since the first 2 credit card accounts are paid by my businesses, I’ve been lured into a false since of security because I don’t see the money directly coming out of my personal checking account to pay for them. My accountant has also advised me NOT to pay off either account in full because it’s better to hold onto the cash, what do you think?
My third account is one that I pay out of my checking account every month. It is in my budget and I'm planning to do so until it is paid off (about 4+ years). If I use the money to payoff this account I will realize a $475 per month saving that I can use for the other debit. Since this account is a personal loan, should I attack the credit card debt first? Since both cards are near maximum credit limits, does that affect my credit score? Should I pay off ½ of each? Is the personal debt more stable as far as changing credit terms? Do rating agencies consider personal loans and credit cards differently? My credit score is great right now, I don't want to damage that in the process. Although I have to admit that since my score is so high, it has been very easy for me to get credit and get into trouble.
I remember reading to tackle the highest interest rate first but in this situation I don’t know of that will help. First since my businesses pay for the first 2 cards, paying off either one will not help me with a debt snowball. However, business or not, I am ultimately responsible for the debt, so if either business starts to slip, I’ll have to pay the payments. I’m confuses, frustrated and nervous.
I currently have $700+ positive cash per month after all my bills and payments, including these. My business positive cash varies.
Thank you for taking the time to read my questions. I am anxious to get started. I feel I’ve made some errors in the past and I don’t want to make anymore.