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Advice for paying off my debt

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smokeyyank
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Advice for paying off my debt  Reply with quote  

Hello,

I had a question I was hoping to get answered in regards to paying off some debt I have. Currently I have roughly 17,000 in credit card debt between two cards. One has 11,500 and the other has 5500. Recently I just sold my most prized possession, my classic truck for 9,000. With this money I want to start paying off my debt. My question is do I just go ahead and pay it towards the one card with the highest balance and highest interest rate? Or pay off my other card completely with the lowest interest rate and put the money I was paying to the other card to the higher balance? My guess would be to put it towards to higher interest rate card but continue to make above minimum payments until it is resolved and then start chucking away at the 5500 balance. I had another idea but wasn't sure if it would make sense, so here it is. I recently purchased a house and have already gained some equity in it ( basically bought it for 215 I owe 206 and the estimated value is 230 , if I was to put to 9,000 towards my principle and take a mortgage loan to pay off my debt would that be smart? I dont think this would work, but that's why I'm asking. Thanks for any input or advice.
Post Fri Jan 23, 2015 6:29 pm
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oldguy
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What are the terms on the $20k loan? 30 yrs? 4%? Fixed rate?
And what are the rates on the 2 CC loans?

But offhand, I'd probably put the $9000 where it had the biggest effect, ie on the highest interest debt - and keep the $8000 debt.
Post Fri Jan 23, 2015 6:50 pm
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oldguy
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$20k. Meant $206k
Post Fri Jan 23, 2015 6:52 pm
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smokeyyank
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Thanks for the reply Oldguy, Yes home loan is 4% fixed 30 year. I already pay bi weekly and additional money towards the principal not a ton but about an extra 75 a month. The high interest card is about 10% and the other is currently 0%, I know it will go up after the promo period but it is about 6%. I agree about putting it towards the higher interest but I just want to make sure I'm making the best move with that money to have the biggest impact.
Post Fri Jan 23, 2015 8:24 pm
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oldguy
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I would stop prepay ing the 4% loan, that is very cheap use of someone else's money. I would pay monthly and keep that loan for the full 30 yrd.

And it makes no sense to borrow money at 10% and use it to prepay a 10% loan.
Post Fri Jan 23, 2015 10:24 pm
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Wino
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Don't touch the house loan (except to make normal monthly payments). Pay off the lower balance credit card, then cut it up. Take the payment you were paying for the lower balance card, plus the extra you were paying on the house, plus the amount you were already paying on the higher-balance card, and pay all of that on the higher balance card.

You did not mention any other debt. No student loans? No car loans? No home equity loans? No "buy now, pay later" loans? Nothing other than the credit cards and the house?
Post Sat Jan 24, 2015 3:08 am
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smokeyyank
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Thanks for the replys. Nope no other debt other than that, I paid for school as I went and I own my jeep outright. I was doing good until buying the house and went through a job change which put me in the hole. I hate having debt and want to pay it off and get on with life.
Post Tue Jan 27, 2015 1:49 am
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littleroc02us
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To me it's all about paying off the revolving debt, because things happen in life. I thought we were doing well in 2001, with a great job, lots of debt, a new truck. But what I didn't realize was that all of this debt was a burden when you lose your job due to the tech bust. Ever since then I've lived without debt except our mortgage which is only 166k and we've paid off 50k in 5 years. What I learned is that you could lose your job, the stock market does crash, you could have a medical problem and so on. So, my wife and I invest 20% of our income into the stock market, we max out our 401k's, we buy real estate rentals and we save money for those rainy days. By doing all of this and having no debt, if something should happen this time around, we are in a very good position to survive and emergency.

When you have lots of debt and no savings or investments because you buy cars, houses, boats and toys, your are simply asking for it.

As for your situation, I would use the 9k and pay off the small credit card and then apply the remainder towards the bigger cc debt. Work you butt to pay it off.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue Jan 27, 2015 5:33 pm
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oldguy
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quote:
I hate having debt and want to pay it off and get on with life.


Instead of measuring yourself in terms of "debt" think in terms of Net Worth.
You're right about getting rid of high interest revolving signature loans. But you should keep your amortized long term low interest debt, and instead, put your money to its highest and best use.
Eg, your 4% 30 yr loan - that's a keeper. If the house goes up in value over the yrs, that adds to your net worth, no matter whether or not you have a loan on it. So that's in the bag, no need to spend money on prepaying that loan, instead invest it where it grows.
Post Tue Jan 27, 2015 5:50 pm
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