Author Topic: need help prioritizing debt repayment...  (Read 5912 times)

FuckRx

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need help prioritizing debt repayment...
« on: August 30, 2013, 03:20:15 PM »

I have the following loans to attack:

Student Loan:              $117,530 @ 2.9% fixed (minimum $350/mo)
BofA credit card:           $13,802 @ 0% (min. $149/mo)
Loan again 401k:         $12,568 @ 4.25% (automatic debit, can only pay back lump sum)
Chase credit card #1:  $4,284 @ 15.24% (min. $90/mo)
Chase credit card #2:  $1,188 @ 16.24% (min. $40/mo)
Citi credit card:             $2,773 @ 15% (min $43/mo)

I can probably pay at a rate of $2,000/mo


Frankies Girl

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Re: need help prioritizing debt repayment...
« Reply #1 on: August 30, 2013, 03:38:18 PM »
If it was me, I'd hit the highest interest ones first, so in this order:

Chase credit card #2:  $1,188 @ 16.24% (min. $40/mo)
Chase credit card #1:  $4,284 @ 15.24% (min. $90/mo)
Citi credit card:             $2,773 @ 15% (min $43/mo)


I don't know why you can't make payments to the 401K loan without it being a lump sum; from what I just went and read, it's automatically debited out of your paycheck, but I'd look into whether you can pay more into it to wipe it out after you've taken care of the other 3 higher interest debts.

As far as whether to pay off the school loan over the 0% BofA card... me personally, I'd be hitting that credit card first and then once all cards are paid off, I'd put the cards someplace safe and forget about them, but then I don't like credit card debt and having that many cards is a recipe for disaster in most cases. Not sure why you would need 4 credit cards? At the least, make one your standard card and forget about the other three and try to be super vigilant about never charging more than you can pay off each month. But logically if the BofA card isn't an introductory rate, then I'd hit the school loan hardest while making the minimum payment on the card.

You don't mention if you have an emergency fund. If you don't, I'd actually take a month or two to sock away at least a few thousand in a savings account (while still making your minimum payments on everything) and then take out the debts.

« Last Edit: August 30, 2013, 07:49:49 PM by Frankies Girl »

kh

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Re: need help prioritizing debt repayment...
« Reply #2 on: August 30, 2013, 03:48:28 PM »
Agree that you should order from highest to lowest interest.  Since the interest rate between the Citi and Chase #1 is nominal, I might pay the Citi first just to have the flexibility of not having that minimum payment anymore.

This plan will have Chase #2 knocked out this month, Citi gone in 3 months, Chase #1 gone in 6 (assuming you're just making the minimum payments on all the others).  However, if that 0% is going to blow up soon, that would definitely change the calculation.

Carrie

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Re: need help prioritizing debt repayment...
« Reply #3 on: August 30, 2013, 03:55:26 PM »
I would pay smallest balance to highest to get some quick wins, and it looks like that's pretty close to the order of interest rates.  Use the snowball effect and take all the minimums from the killed debt and pay on the next debt until they're all done.

FuckRx

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Re: need help prioritizing debt repayment...
« Reply #4 on: August 30, 2013, 03:58:07 PM »

thanks everyone for the input...

BofA is actually at 0% only thought 12/2014, so yes, more of an introductory offer.
I will start paying them down as instructed, makes sense and seems doable.

As for the 401k people, I called them 8 months ago, I asked if they could make much larger withdrawals from my paycheck and they said no, only way is to make one lump sum payment. And they wouldn't let me send money into them, I actually tried and they rejected the check.


FuckRx

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Re: need help prioritizing debt repayment...
« Reply #5 on: August 30, 2013, 04:53:22 PM »

I am in the process of saving emergency cash.
I am going to continue to fund my emergency stash as I pay off.

kh

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Re: need help prioritizing debt repayment...
« Reply #6 on: August 30, 2013, 05:03:00 PM »
Yep, that makes a difference.  The way I figure, throwing in some ballpark figures, you'll have about $12,900 left on the BofA in 6 months, with the three smaller credit cards paid off.  At this point, pay the minimum on the student loans and throw everything else at the BofA, which will pay it off in 8-9 months....which JUST makes it, assuming you stick to your goal of putting $2000 a month towards your debt.  Let the student and 401k loans ride until you get those big credit cards tucked away, the interest rates aren't terrible there.

This is assuming that the interest rate on that BofA card jacks way up, which is usually the case with cards with "introductory rates."  Make sure to read the fine print, too, sometimes they'll charge you the full amount of back interest if you're not paid up by the end of the 0% promotional period.  Not especially common, but worth checking.

sarahcooks

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Re: need help prioritizing debt repayment...
« Reply #7 on: August 30, 2013, 06:12:59 PM »
I would lower the priority on the 401k loan since you're paying the interest to yourself. 

lhamo

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Re: need help prioritizing debt repayment...
« Reply #8 on: August 30, 2013, 09:24:11 PM »
You didn't say what the actual debit payment on your 401k loan is, but assuming it is around $200/month you have about $870 in current payments.  Assuming you are not planning to leave your job and are not at high risk of layoff in the next couple of years (either of which would force you to repay the 401k loan immediately), here is how I would snowball it while building up a basic emergency fund (which eventually can be used to pay off the 401k loan):

Month 1:  $870 in normal payments + $530 in emergency fund + $600 extra to Chase #2
Month 2:  $870 in normal payments + payoff Chase #2 + approximately $550 to emergency fund
Months 3-7:  $830 in normal payments+ $700 extra to Citi (interest rate slightly lower than Chase #1, but psychological effect of paying off a second card quickly will help keep you motivated)+ balance to emergency fund -- by the end of this your emergency fund should be in the $4000-5000 range, which is where I would keep it until you get the credit cards paid off
Months 8-12  :  $790 in normal payments + $1210 extra/month to Chase #2, Chase #2 paid off
Months 12-22:  $700 in normal payments, $1300/month extra to BoA, BoA paid off at the end of this period:
Months 23-33:  $550 in normal payments, $1450 extra/month to savings with the goal of building up enough to pay off 401k loan in a lump sum at the end of this period, or earlier if you feel comfortable drawing down the emergency fund
Months 33 on -- $350 month in regular student loan payments, what ever feels prudent to beef emergency savings up, rest thrown at the student loan monthly until paid off.

Obviously if you can speed up any of the repayments through extra income, bonuses, etc. you would be on a faster timeline.



Will

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Re: need help prioritizing debt repayment...
« Reply #9 on: August 30, 2013, 10:36:42 PM »
You can always plug these numbers into whatsthecost.com and go to the snowballing debt section to see how much the different scenarios cost you and when you'll be projected to be out of debt, etc.

CU Tiger

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Re: need help prioritizing debt repayment...
« Reply #10 on: August 30, 2013, 10:46:01 PM »

I have the following loans to attack:

Student Loan:              $117,530 @ 2.9% fixed (minimum $350/mo)
BofA credit card:           $13,802 @ 0% (min. $149/mo)
Loan again 401k:         $12,568 @ 4.25% (automatic debit, can only pay back lump sum)
Chase credit card #1:  $4,284 @ 15.24% (min. $90/mo)
Chase credit card #2:  $1,188 @ 16.24% (min. $40/mo)
Citi credit card:             $2,773 @ 15% (min $43/mo)

I can probably pay at a rate of $2,000/mo

So your minimums are $673?

Month one, pay minimums on these

Student Loan:              $117,530 @ 2.9% fixed (minimum $350/mo)
BofA credit card:           $13,802 @ 0% (min. $149/mo)
Loan again 401k:         $12,568 @ 4.25% (automatic debit, can only pay back lump sum)
Chase credit card #1:  $4,284 @ 15.24% (min. $90/mo)
Citi credit card:             $2,773 @ 15% (min $43/mo)

and pay all the rest on this one: Chase credit card #2:  $1,188 @ 16.24% (min. $40/mo) If you can really spend 2K a month on debt repayment, you'll knock it out in month 1.

Month 2, 3, 4

Pay minimums on these
Student Loan:              $117,530 @ 2.9% fixed (minimum $350/mo)
BofA credit card:           $13,802 @ 0% (min. $149/mo)
Loan again 401k:         $12,568 @ 4.25% (automatic debit, can only pay back lump sum)
Citi credit card:             $2,773 @ 15% (min $43/mo)

and pay the rest of your 2K on this one until it's paid off: Chase credit card #1:  $4,284 @ 15.24% (min. $90/mo)

From there on out I'd continue to pay them off in this order:

Citi credit card:             $2,773 @ 15% (min $43/mo)
BofA credit card:           $13,802 @ 0% (min. $149/mo)
Loan again 401k:         $12,568 @ 4.25% (automatic debit, can only pay back lump sum)
Student Loan:              $117,530 @ 2.9% fixed (minimum $350/mo)
« Last Edit: August 30, 2013, 10:48:22 PM by CU Tiger »

FuckRx

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Re: need help prioritizing debt repayment...
« Reply #11 on: September 07, 2013, 07:10:20 PM »

here is a piggyback question...
with my student loan at 2.9% should I be paying it off first or start putting money away?
my current savings is pretty much only 60k in 401k...
i have some emergency money too to take me through 3-5 months should i get laid off or something...