What goes first?

iVillage Member
Registered: 01-01-2006
What goes first?
7
Sat, 01-28-2006 - 8:57pm
I have several cc debts - ranging from 0% interest-21% interest. I also have an auto loan with $13,500 left on it w/an interest rate of 6.99.
I will be able to pay about $9500. toward my debts here in the next few weeks. I'd like to pay off an entire card (average balances of $7500.), but my car payment is $469 per month - if I pay the entire 9500 toward my balance owed on the car, it will be paid off this year and that $469 could go toward paying off something else. OR should I pay off a cc that has a higher interest rate? and then roll that monthly payment over to another card to pay off?
iVillage Member
Registered: 04-11-2005
Sat, 01-28-2006 - 9:08pm
I defiantely think I'd pay off the cc with the highest % and then just snowball the rest of the cc's and then the car payment!

Lara

 

iVillage Member
Registered: 06-18-2004
Sat, 01-28-2006 - 9:09pm

IMO, I would pay off the high interest rate ccs. You said you have average balances of 7500 on each cc. You could pay off one credit card AND pay off almost a third of another and then snowball the payment you made to the high interest cc to the one with the next highest rate card, pay that off and then pay off the next card and before you know it all of your cards and your car will be paid off.

If you need more information on snowballing and snowflaking, check out the links on this board.

Once again, that is just my opinion. You have to decide what you will be most comfortable with.

Good luck and let us know what you decide to do.

Kellie

Avatar for cl_beckymk
iVillage Member
Registered: 03-19-2003
Sun, 01-29-2006 - 8:52am

Here I'm going to come along and confuse you.

iVillage Member
Registered: 01-14-2006
Sun, 01-29-2006 - 10:08am

Hi Abbey:

Here is my opinion. I would pay off the highest interest rate credit card first.
A car payment is a secured debt and can always be sold if necessary and credit cards are not.
Also, cc companies are doubling their monthly payments from 2 percent to 4 percent of the total balance of the loan. This does allow you to pay the card off much quicker, but some people can't take the increase in monthly payments.

Best of luck.

iVillage Member
Registered: 08-19-2003
Sun, 01-29-2006 - 12:50pm

Hello Abbey,

I would pay off the highest interest rate debts or several of the smallest amount debts if you want to gain motivation for your snowball.

The car should be the least thing that you worry about.

If you list out the debts with the payments and interest rates we can help you to decide which would be the best financially and motivation wise to start with.

Hope this helps,
Shannon

Shannon


Pregnancy%20ticker
iVillage Member
Registered: 01-25-2006
Sun, 01-29-2006 - 3:10pm

I had a similar conversation with myself (although mine wasn't the big chunk you are looking at, it was my snowball). I decided that I would pay the car off last for the following reasons:
1. The unsecured vs. secured debt issue. Everything I read says unload the unsecured debt first.
2. It is an issue of self discipline for me. I KNOW I will make the car payment on time but I might be more inclinded to fudge on making the credit card payment if I don't have to. It forces me to make those bigger payments.

Good luck and good job spending that lump sum getting yourself out of debt!

Peg

Avatar for endomagazine
iVillage Member
Registered: 11-09-2004
Mon, 01-30-2006 - 2:19pm

Hello,

I would suggest calling all of your creditors and asking them to lower your interest rates. Especially with those higher interest rate cards, you have the "potential" for being able to transfer the balances to your lower interest cards. I'm not saying you'll do it, but you can use this "potential" transfer to convince your higher rate credit card companies to lower your interest rate a few percentage points.

I do a rough calculation to figure out which debt to pay off first (starting with credit cards and unsecured debt):

Total Balance divided by Minimum Payment = # of Payments to Payoff

Example:
9,000 balance / $90 minimum = 100 payments
8,000 balance / $80 minimum = 50 payments
7,000 balance / $50 minimum = 140 payments

In the following scenario, I would pay off the 8,000 balance first, then the 9,000 balance, then the 7,000 balance. Even though the 7,000 balance is the smallest, the snowball will be more effective if added to the account that has the fewest payments left to payoff.

Sincerely,
Lindsey Schocke

Sincerely,
Lindsey Schocke

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