Debt Repayment Plan

iVillage Member
Registered: 04-01-2000
Debt Repayment Plan
Sun, 04-20-2003 - 1:37am
My husband was layed off three years ago and entered an 18 months re-training program the funds ran out for the re-training program, so we payed for the rest of the program out of our pockets. September 11th and the economy made his re-training program almost worthless in our area. He hasn't been able to find a job that pays much more than daycare would cost, so he is now a fulltime father. We can live decently on my salary.

We bought a house two months before he was layed off. Naturally, our finances were strained to the limit! We managed on credit and used it to take up the slack. I switched jobs to earn more money and for the medical benefits we needed. To payoff our $36K (now $30K) worth of credit card and loan debt I took a second job teaching night community college courses.

I use 90% of the money from the second job paying down debt. I read alot of debt repayment plan articles and I hear pay down the debts with the highest interest is the method - but in my case the ones with the highest interest are also the ones with the mega balances so even though the balances are shrinking it feels as if I am still drowning in debt! Just to feel that I am accomplishing something I started paying off the small debts the $1000 or less and was able to payoff 6 accounts. Family and friends tell me I am doing it all wrong. My question is is the difference between paying off a 12% card as oppossed to a 14.5% card that huge of a difference? I calculated that I won't be debt free until early 2006. Thanks for your support and assistance.

iVillage Member
Registered: 08-14-2002
Sun, 04-20-2003 - 3:37am
The "pay off the highest interest' philosophy is justified, but I believe there has to be some gray area. You said, "Just to feel that I am accomplishing something I started paying off the small debts the $1000 or less and was able to payoff 6 accounts."

My fiance and I did the same thing - seemed like the progress was so slow by paying off the high-interest (biggest accounts) first, and we became discouraged because there were still so many. So we switched strategies: we maintained minimum payments for about a year on two high-interest accounts, while throwing every penny we could at the smaller, lower-interest accounts. We paid off 14 credit cards in one year. 14!!! We were so excited and this gave us loads of encouragement to stay on track. Over the next two years, we paid off those monster accounts as well.

I'm no fiancial advisor, and those who are might disagree with me - but sometimes a little psychology goes a long way. So we spent more in interest charges with this strategy, but our frame of mind while doing so made it all worthwhile.



iVillage Member
Registered: 04-19-2003
Sun, 04-20-2003 - 1:08pm
I agree with Msfit. Paying down the little balances and seeing those debts wiped clean can be a big boost and keep you on track to paying down your debt. I feel discouraged when I don't see the balances going down as fast (and when I get discouraged I tend to say to myself "what the heck - I'm in debt anyways might as well use the cc") and having to make several cc pymts instead of fewer can be discouraging as well. Myself, by paying off the smaller balances it helps to keep me focused and encouraged to keep paying down rather than gettting discouraged and charging again! You are doing what works for you and that is all that matters! And no I don't think there is a big difference from 12 to 14.5% interest. Keep doing what you are doing!


Avatar for mrslove2000
iVillage Member
Registered: 03-26-2003
Sun, 04-20-2003 - 1:14pm
I don't have the answer to your question about the 14.5 % vs 12.% however, I do believe whatever will keep you motivated and paying off debt is what works for you.



iVillage Member
Registered: 03-26-2003
Sun, 04-20-2003 - 2:06pm
I think you are doing a great job reducing your debt. You've said that you won't be paid off until 2006 but that really means that each year you are going to be able to pay off 10,000 dollars! That's a lot of money. I don't think that the percentage difference of 14 to 12.5 will make that great a difference and by continuing to close off little accounts you'll have the psychological boost of a ton of small successes early on. If you are really worried about the difference in interest, work on that by asking for a reduction in the rate from your creditor or finding significantly lower interest cards you can transfer that debt to.