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How should I pay things off?

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How should I pay things off?  Reply with quote  

Hi everyone,

Im currently in the process of paying off all my debt. I have a bit over 6k in my savings account and my current debt is as follows.

Car Loan: $6602
Credit Card 1: 8,600
Credit Card 2: 7,200

My plan was to pay off the car loan which frees up $260 a month that I can snowball into one of the credit cards. Is that the way I should go or do you guys believe I should approach it a different way?
Post Mon Mar 06, 2017 5:54 pm
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Do you have an emergency fund? If not take $1000 and setup that aside for any problems that arise in life. Then take $5,000 and put it towards the car loan. Asap, pay off the car loan which opens up more income to apply towards debt. I went through this years ago and paid off the smallest to the largest debt first since my plan was to eliminate debt as fast as possible and when you knock one of them out, it gives you the motivation needed to finish the rest.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Mar 06, 2017 7:56 pm
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in the process of paying off all my debt.

Starting at the beginning - why do you want to pay off all of your debt?

A $22,000 debt load with $6600 of it backed by collateral, is not a large debt-load. Are the interest rates toxic? If so, pay those loans first. And consider keeping your low cost loans.

Example - I bought a new 2017 Van a few months ago, about $38k. I financed the entire amount for 5 years, the loan rate is 2.75%. I set up auto pay to pay the loan - and I left my own $38k invested in a fund that has been averaging 11%/yr for decades. My goal is to double my $38,000 investment in about 6 years, soon after the Van is paid-for.
Post Mon Mar 06, 2017 9:12 pm
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Old guy brings up a great point. There isn't anything wrong with debt on the surface. However, if you aren't good at budgeting, and live outside your means, then debt can kill you. Looking at your post, it does seem concerning that you have $15,000 in credit card debt. Unless it was a medical emergency, there is almost no reason to have that much debt outside of living beyond means. Don't get me wrong. I've charged $6000-$7000 at one time, but I've paid it off the first payment. (I did this to get 75,000 airplane miles on a promo). But generally, there's no reason to have that level of credit card debt. If you did it intentionally, like I did, you wouldn't be asking for advice here.

So, having said that, your car loan interest is probably much lower than either of the credit card loans. What I'd do, is depending on your credit, collateral, value of car, equity in house, etc. I'd see if you could get a consolidation loan to bundle the $22,000. That will get your monthly lower than it is not. Unless you're paying the minimum on the credit cards.

Is then reassess your budget to see if paying down the one loan early is a smart idea, or if you can live comfortably with the payments and start investing smartly. If you can't consolidate the loan, pay off as much on the highest interest of the two credit cards, then when you pay it off, snowball paying off the 2nd one, then eventually the car.

Then, budget so you can live within your means. If you don't like that quality of lifestyle, then get a better job or second to bring in more money. But stop using credit cards as loans. If you can't pay them off each month, then you shouldn't buying whatever it is you are charging.
Post Sat Mar 11, 2017 11:25 pm
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