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Which bill to pay first?
bigpanda
Registered User regular
Registered User regular
Ok, so I just came into some money and was going to use it to pay off some debt I have.
Here's what I hypothetically owe (amounts are different but rates and percentages are the same).
A. $900 @ 8.9% - paying $15/mo
B. $450 @ 12.9 % - paying $15/mo
C. $1100 @ 10.9 % - paying $20/mo
D. $130 @ 0.0 % - paying $15/mo
I have $1000 to allocate towards these amounts, normally I pay $65/mo towards the debt. My question is should I pay off the largest amount (C) or split the funds to cover multiple debts (i.e. A & D), if so which ones?
My goal is to get out of debt as quick as possible but also want to stay motivated to do so.
I also have a car note and school loans, but wanted to remove unsecured debt first as I understand that's supposed to be the riskiest debt.
Here's what I hypothetically owe (amounts are different but rates and percentages are the same).
A. $900 @ 8.9% - paying $15/mo
B. $450 @ 12.9 % - paying $15/mo
C. $1100 @ 10.9 % - paying $20/mo
D. $130 @ 0.0 % - paying $15/mo
I have $1000 to allocate towards these amounts, normally I pay $65/mo towards the debt. My question is should I pay off the largest amount (C) or split the funds to cover multiple debts (i.e. A & D), if so which ones?
My goal is to get out of debt as quick as possible but also want to stay motivated to do so.
I also have a car note and school loans, but wanted to remove unsecured debt first as I understand that's supposed to be the riskiest debt.
bigpanda on
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You should pay off the highest interest rates first. So pay off B and then $550 towards C. Allocate your extra $15/month towards C also (having paid off C you should have $15 more per month).
Edit: Once D is paid off (that should be about 9 months from now), also allocate that money to C.
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@gamefacts - Totally and utterly true gaming facts on the regular!
If that is the case, I totally agree with all of this. Then take those payments for B and D and use if for A and C, but mostly C.
What is the interest rate on your car loan?
Ok, so D is through a promo rate w/ Best Buy. I calculated what I needed to pay monthly to have it paid off 2 months before the end of the promo period. Dangerous I know, since if I lost my job or wound up in a pinch I'd be screwed, but it is what it is. Needless to say, I don't think I'd play that game again.
My car loan is at 4.5% I think, would have to double check the books, but if not then it's 5.5%. I just refinanced that this last August.
Also, these are all credit cards. I didn't include my student loans since while I'm committed to getting them paid, they aren't as high a priority as getting the credit cards and car paid off since I can deduct the interest when it's tax time. I do need to follow Thanatos' advice and consolidate those this month (have to dig up all the paperwork still).
I didn't include the car loan in the list.
@gamefacts - Totally and utterly true gaming facts on the regular!
tl;dr if the REAL minimum payments aren't an issue than the interest rule is great. But my life is a LOT simpler now that I have that $360/month minimum payment out of my life.
PSN: TheScrublet
Very good point. I'm currently socking away about $400 a month on the side into an emergency fund which I've had to pull from a few times already (repair bill to cover my car getting broken into, and a couple other things).
The interest after the promo period on D is like an astronomical +30% and if I don't get it paid off before the end of the promo period I'm pretty sure that I'll have to pay back interest on the loan (all in the fine print). That's why I'm so adamant about getting that one cleared out on time. I had been thinking that I could knock that out (D), knock out B, and drop the remainder on C. That would also allow me to pay $50 on C every month and just whittle away at A for now.
Once I get the emergency fund up to $1000 then I start redirecting what I can towards C or A until that's paid off and then divert the rest to the other. Once all the cards are paid off, I'm going to redirect those amounts towards the car loan and once all that's off I'll start focusing on the school loans. Only kicker is that I want to start putting some money aside for a house once the cards and car are resolved.
A Best Buy card goes up to 25% (give or take 2%) after the promo period. I'd say get rid of that one first.