Need some advice...which do I pay off first?

**rachelMcK** · 06-18-2008, 01:22 PM

I just paid off the first of 2 cc's. So now, I have one credit card, financing, and 3 student loans left. Now, by financing, what I mean is, for Christmas, I wanted to buy DH a bunch of guitar stuff to put in a stocking. Yeah, I walked out with a $2000 guitar that I financed. I'm glad I did it, because he LOVES it, but I'll never do it again...lol. My monthly payments are coming off of the 2nd cc. The balance on that is $450 with interest of 18.5%. The balance left on the guitar is $800 with interest of 4%. Which should I work on first? With the guitar payments, if I went into the store, and put $200 towards it, the payment for the next month would not go on my visa, it counts as that payment. Once I build up a small EF of about $500 (one more paycheck to go), I will have about $300 a month for debt reduction.

What would you do?

TIA

**Michelle** · 06-18-2008, 01:25 PM

Personally I would pay down the one with the higher interest rate. 18.5% interest is pretty high, especially when compared to the 4%.

HTH

**rachelMcK** · 06-18-2008, 01:27 PM

This is where I'm unsure because the monthly payment for the guitar (@4%) gets taken from the cc with 18.5%. So even if I pay off the CC, it will still carry a balance every month due to the guitar payment.

**Kitten20** · 06-18-2008, 01:28 PM

I think I would pay off the smallest one first, which looks like the cc. It also has the higher interest rate.

**Kitten20** · 06-18-2008, 01:30 PM

Originally Posted by rachelMcK

This is where I'm unsure because the monthly payment for the guitar (@4%) gets taken from the cc with 18.5%. So even if I pay off the CC, it will still carry a balance every month due to the guitar payment.

What is the monthly minimum on the guitar? If I am understanding you correctly, your cc gets billed $xx.xx per month to pay for the guitar? Do you have to let it carry a balance? Can you pay down the cc to eliminate that debt while still paying minumum on the guitar so you don't carry a balance? Hope I am making sense and understanding correctly.

**rachelMcK** · 06-18-2008, 02:09 PM

The payment is about $130 a month. Normally I wouldn't let it carry a balance, I would just pay it off, but other things went onto it, so that is why the balance is so high on the cc.

I see what you mean though. Work on paying off the cc, and then once the cc is paid off, just pay the guitar payment as soon as it comes off the cc?

**kcsmom76** · 06-18-2008, 04:51 PM

I would payoff your smallest debt first and then use that payment to pay on your other debts.

I hope this helps.

**MTS04** · 06-18-2008, 04:59 PM

Ok, I think I understand what you are saying... The company that you are financing the guitar through, is billing your CC though automatic payment?

If so, I would call them and ask if they can bill you monthly instead of autopay from your CC.
Then I would pay your monthly payment to the guitar and pay off/pay down the CC. Even if your loan amount on the guitar is 4%, in reality you are paying 22% becuase you are paying the 4% on the guitar loan and 18% on your CC from the autopay.
I would figure out a way to stop the guitar payments from being deducted from your CC. Even if you have to give them the money ahead of time each month, do it. Otherwise you are paying financing twice on that loan.

**Palooka** · 06-18-2008, 10:32 PM

I would pay off the smallest balance first.

**FrugalMomof3** · 06-18-2008, 10:39 PM

I personally would go for the one card with the higher interest rate, paying that off faster will save you a bunch of interest money for sure

**Wendy99** · 06-18-2008, 10:51 PM

Originally Posted by rachelMcK

I My monthly payments are coming off of the 2nd cc. The balance on that is $450 with interest of 18.5%.
TIA

I would pay off that one first as it has the highest interest rate & not only that it's the lowest balance, so it will give you a sense of accomplishment

**missmanny** · 06-18-2008, 11:14 PM

If it were me I would ay of the cc first. that way the only charge per month on it will be the Guitar payment. seeing as how you usually don't carry a balance on this card I think that it will make you feel better and then you can start to focus on the guitar.

To my mind the smallest debt's should go first that way you can start to make your snowball really work

**Drgnfly423** · 06-18-2008, 11:41 PM

I agree with everyone else! Payoff the smaller balance card with the higher interest rate, then start attacking the guitar loan. It will give you a great sense if accomplishment. =) It works for me, anyway!

**Libby** · 06-19-2008, 12:04 AM

Originally Posted by rachelMcK

I just paid off the first of 2 cc's. So now, I have one credit card, financing, and 3 student loans left. Now, by financing, what I mean is, for Christmas, I wanted to buy DH a bunch of guitar stuff to put in a stocking. Yeah, I walked out with a $2000 guitar that I financed. I'm glad I did it, because he LOVES it, but I'll never do it again...lol. My monthly payments are coming off of the 2nd cc. The balance on that is $450 with interest of 18.5%. The balance left on the guitar is $800 with interest of 4%. Which should I work on first? With the guitar payments, if I went into the store, and put $200 towards it, the payment for the next month would not go on my visa, it counts as that payment. Once I build up a small EF of about $500 (one more paycheck to go), I will have about $300 a month for debt reduction.

What would you do?
TIA

Originally Posted by mythreesons2004

Ok, I think I understand what you are saying... The company that you are financing the guitar through, is billing your CC though automatic payment?

If so, I would call them and ask if they can bill you monthly instead of autopay from your CC.
Then I would pay your monthly payment to the guitar and pay off/pay down the CC. Even if your loan amount on the guitar is 4%, in reality you are paying 22% becuase you are paying the 4% on the guitar loan and 18% on your CC from the autopay.
I would figure out a way to stop the guitar payments from being deducted from your CC. Even if you have to give them the money ahead of time each month, do it. Otherwise you are paying financing twice on that loan.

I think I'd have to agree with mythreesons2004.

If I am reading this correctly you are getting charged 18.5% on the remaining balance of $450. And then every month the guitar is getting charged to your cc as well but at 4% on top of the total monies borrowed used to buy the guitar - balance of $800.00 remaining.

So it's actually 22.5% interest you're going to be paying on the guitar until the balance is paid off.

If you're able to, go in ahead of when they're due to charge your card for the payments on the guitar and pay cash/debit. I'd advise you to do that to avoid the extra 18.5% on top of the 4% of the $800.00. And as you stated, it would count as your monthly payment and you're not making two interest payments for the same one item.

Then while going to pay cash for the balance of the guitar, focus on paying down the $450 @ 18.5%.

Sorry if I just repeated what she said...I know how I want to say it in my head but I dont think I articulated how it was intended to come out. Its late.