Which should I pay off first?

[Preston]

In the next step I have of debt reduction I am not sure what my next move should be...

I can apply about $2000 a month toward debts on base salary. But for Christmas there should be some bonuses showing up.

I currently have a $6000 balance being carried at 11% interest

I have a $10000 balance which is at a 5.9% rate right now. However, on Feb 1 the APR will shoot up to 26%.

I have a balance transfer available to me at 18% right now (but often times if I keep the account at zero balance they will usually send me an offer for 7% BT for 6 months.)

Should I attack the $6000 balance first? And then when it is time for the $10000 to go up should I look into transfering it out? Or just immediately start hacking away at the $10000 right now and just deal with the $6000 later?

As of right now I have going to have to transfer the whatever is left of the $10000 at the end of January anyway if I go that route.

Any feedback is appreciated.

[Michelle68]

Personally, I would work on the $10000 debt, especially since it goes up to such a high interest rate in a few months. By February, at $2000 a month, you should be able to pay it down to around $2000 and maybe pay it off altogether with any Christmas bonuses you get. Hope this helps.


--Michelle

[Jenna]

What's the utilization of the cards? ie what's the credit limit compared to the balance on the cards?

What's the minimum payment on the c/c's?

How are your retirement, and efund accounts?

[mikandmari]

26% is really high, but if you know you can transfer the entire $10000 before this happens, then I would pay towards the $6000 at 11%. If you're not sure you can transfer the entire $10000, I'd attack that first. JMHO.

[ilovechocolate]

There are 2 schools of thought on this: 1) Pay off the account with the smallest balance first OR 2) attack the account with the highest interest rate.

Since the interest rate is going so high pretty soon, I would probably try to work on that account first.

[pita1213]

is the $2000 the total you have to split between the debts or is that on top of paying the minimums? if that $2000 is extra after paying minimums, i would put it towards the larger debt before the interest rate goes up. the more you can get paid off the better you will be if there is still a balance when the rate changes. if that $2000 is all that is available in your monthly budget for all of the debts, i would pay the minimum on your other debts and apply whatever is left of the $2000 to the large debt.

attack that larger debt so the high rate doesn't bite you in feb.

[Marie78]

I agree with paying towards the higher debt first. It will probably be easier to transfer a lower amount from that card when the rate goes up. Good Luck, it sounds like you are doing great with your debt repayment .

[dcompton]

I agree. In this case, I'd tackle the big one. Marie 78 is right -- get the balance smaller before you tranfer it. If you get a really good balance transfer offer, you could also transfer some of the other one if transfer fees vs. its interest payments would save you money.

[frugal-fannie]

I would probably go only 1k on the bigger one and pay the other 1k to the lower one.By lowering the higher one not so close to the max of your credit you will improve your credit. The the transfer balance will come again before your time is up so by paying more on the lower one you will win both ways. I think you will inspire yourself to work harder to knock that debt out by getting rid of one and then doubling up paydown on the larger one you will also enjoy the lower interest for a few more months on the higher one.

[Denvergirlie]

I would probably go only 1k on the bigger one and pay the other 1k to the lower one.By lowering the higher one not so close to the max of your credit you will improve your credit. The the transfer balance will come again before your time is up so by paying more on the lower one you will win both ways. I think you will inspire yourself to work harder to knock that debt out by getting rid of one and then doubling up paydown on the larger one you will also enjoy the lower interest for a few more months on the higher one.

I would only do this if you care about your credit rating right now... if you are not going to be buying anything new on credit (new loan, etc) in the next 6-12 months then it makes zero differenc on your credit utilization.

I follow Dave Ramsy in paying off smaller debts first, but that's only a motivating factor. What are you plans for this debt? Do you plan on keeping it or are you in a complete pay down mode at this time? Are you working towards paying it all off and never getting in debt again?

Have you looked at a snowball calculator to determine the real cost of attacking the $6K vs the $11K?

Sounds as if you can pay $6K towards debt reduction in the next 3 months. Thus you can have two debts both at about $5K or you can have only one debt at $10K.... what is more motivating to you to get rid of. Soemtimes, you need to look at keeping your motivation high in order to get rid of that debt.

You illknow what's best for you, so good luck!

[frugal-fannie]

I would only do this if you care about your credit rating right now... if you are not going to be buying anything new on credit (new loan, etc) in the next 6-12 months then it makes zero differenc on your credit utilization.

I follow Dave Ramsy in paying off smaller debts first, but that's only a motivating factor. What are you plans for this debt? Do you plan on keeping it or are you in a complete pay down mode at this time? Are you working towards paying it all off and never getting in debt again?

Have you looked at a snowball calculator to determine the real cost of attacking the $6K vs the $11K?

Sounds as if you can pay $6K towards debt reduction in the next 3 months. Thus you can have two debts both at about $5K or you can have only one debt at $10K.... what is more motivating to you to get rid of. Soemtimes, you need to look at keeping your motivation high in order to get rid of that debt.

You illknow what's best for you, so good luck!

I was looking at the improving of credit helps her to receive more offers and lower % when you do receive the offers for balance transfer.

[Preston]

Thank you for your replies!!!

I am looking at it more as one big $16000 chunk of debt than two separate debts but I am looking at the most efficient way to go about it.

I am not really worried about my credit at this point. It's already taken its hits by me joining a CCCS for the debts that became unmanagable. I didn't get all my CC's into the CCCS because many of them were at decent rates for Life of Loan. The only two that are still an issue are these two. After that it's smooth sailing.

After these two debts I am working on paying off the amounts that I have in CCCS.. which total $14000 (starting from $27000 a little over a year ago). I want to get out of paying the $45 a month fee the CCCS is charging me but I crunched the #'s and the lower interest rates I'm getting with them involved outweigh the higher interest I'd get without the fee.

Being in debt sucks and I don't want to deal with it any more.

[Preston]

oh yeah, forgot to mention I'm attacking the $10000 first. If I get that thing paid off it will feel pretty good!

[Libby]

I'd pay $500 to the smaller one and $1,500 to the larger one. This way they both go down in time.

You can call your credit card company and ask for the low interest balance transfers before they offer them to you as well. I had one offered to me and I didnt need it and then 2 months later I did and called to ask for it and got it. Once I paid off that balance I had called to ask them for another and got it again - they just dont keep advertising it.

[Jenna]

I was looking at the improving of credit helps her to receive more offers and lower % when you do receive the offers for balance transfer.

That's what I was thinking, too. That's why I asked so many questions. The lower her utilization, the odds are it might improve her chances of getting a better BT rate. Also, if a card is too close the limit, a small mistake can put her in a spiral of fees, and increased APR's.

Also, if the 6K balance is PIF, can she get a low interest BT rate offer from that card? then transfer the 10k or a portion of the 10k.

Also, do any of the cards have any fees?

The minimum payment can make a difference, too. By PIF the 6k, what monthly payment is freed up to throw at the 10k? (and vice versa)