Snowballing Beginner

**murphythadog** · 07-06-2009, 05:03 PM

We have 3 credit cards, I have 2 student loans. I heard DR mention putting the Student Loans in forbearance and then paying off the smallest Credit Card debt first, then the 2nd one, then the 3rd. Here's our situation:

Credit Card 1: 5k ~ currently paying $150/month
Credit Card 2: 5k ~ currently paying $150/month
Credit Card 3: 9k ~ currently paying $200/month

Student Loan 1: 24k ~ currently paying $165/month
Student Loan 2: 20k ~ currently paying $195/month

If we put the 2 student loans in forbearance, should we try to roll the 3 cards into a 0% apr and pay that off using ~1166/month. Then try and lump the 2 student loans together and pay them off in almost 4 years using the same amount of cash that was going to the credit cards?

Just looking for some advice on some folks who may have already done this.

**a.nonymous** · 07-07-2009, 04:53 AM

I've got no idea how forbearance works, so I can't advise on that. I don't even know what you need / if you need anything to qualify for forbearance. I've got the remains of my study debt on a personal loan. I studied all over the place and did not take out any formal loans for studying.

I'm not sure if lumping your CC debt together onto one card is a good idea. Here are a few reasons to consider:
1) You'd better read the Terms & Conditions very, very, very carefully. And make sure you understand every little bit of it. If you've piled your debt into one card, you're pretty much at the mercy of one company regarding all your debt. If they pull a similar stunt as Chase and friends did, you might end up in a mighty pickle.
2) By piling credit card debt into one card, you're losing the (in my opinion) most valuable tool of DR's snowball system: Motivation. Scratching one debt off a list is extremely rewarding and seeing the money you throw at a card increasing (hence the image of a "snowball" rolling down the hill and picking up speed and weight) as well.
3) If motivation/discipline is not the problem for you - for most people it is, because that got them into consumer debt in the first place - then you'd be better off paying off in order of highest interest rate first.
4) Make absolutely sure that if you do follow through, you get rid of the other cards immediately. If you don't, you enable yourself to keep piling on debt on the clean cards.

So, while trying to get as much onto a 0% interest card makes a lot of sense mathematically, you may well end up shortchanging yourself in the typically most important departments: Discipline and motivation.

Obviously, it is your call. But I felt I should also point out some common risks involved.

**Greebo** · 07-07-2009, 08:26 AM

Once again, a.nonymous has said everything I was going to say.

You thunder stealing bat rastard!!!

**kita** · 07-07-2009, 08:35 AM

Also, remember that usually when you "roll" your CC balance there is a transfer fee...of 3% right off the top...

**a.nonymous** · 07-07-2009, 11:53 AM

Originally Posted by Greebo

Once again, a.nonymous has said everything I was going to say.

You thunder stealing bat rastard!!!

I'll try to be a bit slower next time...

**murphythadog** · 07-07-2009, 03:40 PM

I guess that makes sense as to being able to scratch them off one at a time. I'm also thinking about stopping my 401k contribution and taking the 400 i put into savings and paying down some the debt. This will greatly increase the amount per month.

Currently monthly expenditures:

Student loans: $300
Cards: $400 (100/100/200)
Savings: $400
401k: $370
Total: $1470

Total Debt ~ 64000 ish
@ 1470 per month would get us outta debt in a little under 4 years if all things stay the same. Then i can turn back my 401k and savings maybe even increase them. or add that to our mortgage and possibly pay that off in a little over 7 years after that.

**Greebo** · 07-07-2009, 04:02 PM

Originally Posted by murphythadog

I guess that makes sense as to being able to scratch them off one at a time. I'm also thinking about stopping my 401k contribution and taking the 400 i put into savings and paying down some the debt. This will greatly increase the amount per month.

That's what Dave recommends

@ 1470 per month would get us outta debt in a little under 4 years if all things stay the same. Then i can turn back my 401k and savings maybe even increase them. or add that to our mortgage and possibly pay that off in a little over 7 years after that.

What Dave suggests is once you're down to JUST house debt, then it's time to fully fund the retirement plan. House debt is different than other debt - you don't want to put paying down the house BEFORE you fund your ability to EAT while you live in that paid for house when you're 65.