What would you do?
Find a Conversation
| Wed, 04-30-2008 - 5:30am |
Sorry in advance for the length of this
My debts as listed in my intro are
Hire Purchase - $415 remaining, minimum monthly payment $23.31, payments due by 16th of each month, final payment October 2009, interest already included in total, currently pay $25 per month, with no change to the pay off date.
Bank Loan - $8396.68 remaining, minimum weekly payment $49.93, current pay of date is May 2012, current interest date is 10.70% per year, in November 2009 this will rise to approx 17.75% per year
Visa- $999.02 remaining, minimum payment is 2% of balance, interest is 21.95% per year with an annual fee of $25, billed around 20th of each month, with payment due around 13th of the following month
Overdraft - $2000 limit at present, I currently sit close to the limit, no required payments, currently interest free, will start charging 18.95% per year for interest mid May 2009, also pay approx $5 per month for this facility
Student Loan - $24818.08 remaining, interest free so long as I spend at least 6months of each year in NZ, paid automatically out of my wages. I don't have an exact idea of what I was required to pay until the end of the tax year.
I am paid weekly, and so budget on a weekly basis.
I have several questions
1. How would you track your snowflakes if you were in my situation? (I have access to Excel)
2. How do I determine the amount of the snowflake? Is it the amount about the current minimum at the time I pay it, or is it the amount above the minimum when I started?
3. Is there anyway to calculate when my debts would be paid off using snowflaking/snowballing based on my budget? Everything I can find is based on budgeting monthly, which makes no sense to me since I'm paid weekly.
4. What order to you recommend paying my debt down in?
My inclination is continue paying the Hire Purchase at $25 per month until it is paid off.
As for the remaining debts, I'm inclined to pay the Visa first (coz of the interest rate), then the Overdraft, followed by the Bank Loan and finally the Student Loan.
A couple of extra things to take into account
* I'm in the process of saving for a car - as a person is halfway through my mechanic's training with little confidence in my driving, I want and feel I need a car.
* I'm putting away a few dollars ($5) a week towards an Emergency Fund (I don't currently have one).
* I have compared credit cards at my bank. The interest rate on the Low Rate Mastercard is 14.90% per year with annual fees of $59. Speaking to the credit card team at my bank, ignoring the fact that the monthly interest charges will decrease each time the balance reduces, this would only save me $50 per year. I'm not sure that this is worth the change of car since I would want to change back to Visa once I have eliminated the balance.

I do not know anything about Excel I have
1. How would you track your snowflakes if you were in my situation? (I have access to Excel)
Excel will work fine but I too use Quicken.
I would suggest that once you save an emergency fund(and you will need that if you want a car!) you should pay off as much of your credit cards as possible. When the time comes to buy a car you will get a much better interest rate on it than you have on your credit cards.
In the US car loans are rarely higher than 7% with good credit.
Thanks for the feedback.
At this stage in time, I intend to save the money for a car and not borrow any money at all. I know the result of this is that I will probably end up with an older car (given where I am it will be a Japanese import). I'm comfortable with this, as I know that cars tend to depreciate in value faster than any loan that I would be paying off.
I'm aware that the credit card rates seem high - I've had a look at the local rates in NZ and the rates that I'm on seem to be fairly standard across all the banks.
Even when decent offers (eg. one of the banks is currently offering 4.9%) it tends to be for a short time, that offer being for 6 months.
I went and spoke to my bank today.
My credit card has been changed to a low rate mastercard. As a result, I still have the same balance and minimums but my interest rate has dropped to 14.90% and annual fees of $58.