Author Topic: Which of my debts should I be throwing extra money at?  (Read 2493 times)

ozmaofoz

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Which of my debts should I be throwing extra money at?
« on: March 25, 2015, 09:40:54 PM »
Hello, all! New to this community, but been reading for a while. Slowly shifting my habits to more mustachian ways. I've reached a point salary-wise where I'm able to make some good headway paying down my credit card debt, but I need advice on which debt I should be putting extra money toward! I have consolidated most of my credit card debt into a $17k unsecured fixed-rate 4-year personal loan from Discover (it was with Wells Fargo at 13% but Discover refinanced me into 7% last month). Monthly P&I payment is $415. The remainder of the debt is just under $7k and I transferred it all to my Discover credit card using one of their 0% offers. Minimum payment is $130, I'm currently paying $200 a month at least. The 0% rate is good through June 2016. Given the expenses I've been able to trim, I now have at least an extra $100-200 a month to throw at my debt, and am hoping for a raise of another about $200 a month at the end of summer. Which of these two debts would you advise I throw the money at? Thanks!

MDM

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Re: Which of my debts should I be throwing extra money at?
« Reply #1 on: March 25, 2015, 09:45:48 PM »
In general, paying faster on the one with the highest interest rate is best.

What rate does the 0% go to in June 2016?  Is it retroactive if you haven't paid in full by then, or does it simply start accumulating interest on the balance at that time?

ozmaofoz

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Re: Which of my debts should I be throwing extra money at?
« Reply #2 on: March 25, 2015, 09:52:25 PM »
I actually don't know if it's retroactive - I had heard that's the case on all balance transfer offers like that. It goes to something ridiculous like 17%. I just read the fine print in my current statement and couldn't find where it says if it's retroactive or not; I don't have the paperwork from the original balance transfer offer anymore where it may have said. I have a good credit score and payment history so I feel good about my changes of being able to transfer it again to another card's 0% offer (although I know I'll have to pay the balance transfer fee).

MDM

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Re: Which of my debts should I be throwing extra money at?
« Reply #3 on: March 25, 2015, 10:34:04 PM »
You could download and work with this spreadsheet: http://www.vertex42.com/Calculators/debt-reduction-calculator.html, although it may not handle the "0% until 6/2016" loan correctly.

With $24K of high interest debt, and looking at taking several years to pay it off...take a look at the case study sticky.  If you are up for it, start a new thread using those suggestions and you'll likely get some good ideas.

Chrissy

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Re: Which of my debts should I be throwing extra money at?
« Reply #4 on: March 26, 2015, 08:03:02 AM »
Pay down the personal loan.  Pay just the minimum on the cc debt and transfer to a new 0% offer when the time comes.

neo von retorch

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Re: Which of my debts should I be throwing extra money at?
« Reply #5 on: March 26, 2015, 08:12:13 AM »
Unless you can keep finding 0% (that don't have an expensive balance transfer fee), I'd recommend getting rid of the 0% credit card as fast as possible. If you only average $150 extra towards that card through June 2016, you'll still owe ~$3000 and that ~17% will kick in. With my debt snowball/waterfall calculations, I estimate total interest paid if you pay off the credit card first is $2486 but if you pay extra on the personal loan first, you end up paying $3178.

frugaliknowit

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Re: Which of my debts should I be throwing extra money at?
« Reply #6 on: March 26, 2015, 08:13:58 AM »
Echo what others have said.

You also need to address how you accumulated this debt.  Was it a one-time calamity like a job loss or medical event?

If not, you need to immediately look at your income and outgo and prevent this from happening again (tough hug).  Housing and transportation costs are often the culprit.