| What to pay off first? HELP? |
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Cornfused
New Member
Cash: $ 0.90
Posts: 4
Joined: 16 Feb 2009
Location: Between a rock and a hard place
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| What to pay off first? HELP? |
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I will be coming into about $8K fairly soon. I really need to spend this money as wisely as possible in an effort to get out of some debt. I have around $5K left on my auto loan, but only 12 payments of $413 left. I am only paying about $35-40 a month in interest on this loan, but I can free up the $413 a month to pay toward my credit card debt. I also have a small credit card with only $1900 at 13% and a $50 monthly payment. My problem is a credit card with a $10K balance, that a $1000 cash advance years ago has led to 7K of this 10K being at 22% interest. I am torn with the question of wether I should throw all $8K toward the credit card at 22% interest, or should I pay off the auto loan to free up the $413 a month? I would quickly be able to build up a $1000 emergency fund and then apply to the 22% credit card the $413 plus the $210 a month payment now. The real dilemna I have is that the auto loan is down to only 12 payments left. Either way I should be out of both debts at about the same time, a year from now. Advice anyone?
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Mon Feb 16, 2009 1:35 am |
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Cornfused
New Member
Cash: $ 0.90
Posts: 4
Joined: 16 Feb 2009
Location: Between a rock and a hard place
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That's what I keep telling myself; win a small battle so I keep trying to win the war. Thanks for the advice. I'm also thinking about paying off the auto loan and then taking out a small line of equity loan to pay off the high interest credit card. Any thoughts on that?
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Mon Feb 16, 2009 12:28 pm |
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littleroc02us
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Cash: $ 384.35
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Joined: 09 Feb 2009
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I personally would come at this in a different direction that I have done myself that were recommended in a book called "The Total Money Makeover". There are 7 steps to becoming financially successful, I will give you two that are important to you now.
First save $1000.00 in an emergency fund. This is very important because while I was on step #2 my furnace broke down and I was able to pay for the repairs in cash. You may have to sell items in garage sales, sell items on Ebay or take an extra job, but it is very important to do this right away while making minimum payments.
Second, most people will tell you to arrange your debts by paying off the highest interest rates first. I disagree. My suggestion would be to arrange your debts from lowest to largest. Pay minimum payments on the larger debts and apply as much cash to the smallest debt first. Once this debt is paid off apply that same amt you were paying on the smallest debt to the next debt in line. Once that one is paid off then apply all of that money to the next and next and next. By doing it this way, you will achieve small victories along the way that will help to motivate you.
I hope this helps.
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Mon Feb 16, 2009 3:01 pm |
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