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Old 04-03-2009, 11:24 PM
 
Location: Memphis
951 posts, read 3,697,213 times
Reputation: 535

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SO I got a question. I have heard that if you are paying off debt pay off the highest interest cc first. Well, I have a couple of those and then I have 2 car loans. I am making an effort paying off my debt. But my car loans equals 500 bucks a month and th cc payments are 150 a month. SO I rather concentarte on paying off the car loans and have them paid off by the end of this year and then put an extra 500 bucks a month on the Credit cards?
More bank for the buck so to say.
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Old 04-03-2009, 11:55 PM
 
Location: Long Island
9,916 posts, read 23,020,357 times
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Quote:
Originally Posted by redwine View Post
SO I got a question. I have heard that if you are paying off debt pay off the highest interest cc first. Well, I have a couple of those and then I have 2 car loans. I am making an effort paying off my debt. But my car loans equals 500 bucks a month and th cc payments are 150 a month. SO I rather concentarte on paying off the car loans and have them paid off by the end of this year and then put an extra 500 bucks a month on the Credit cards?
"CC payments are $150/mo" - that sounds like the minimum payment... No reason why you can't pay extra $$ on the cards and get rid of that debt quickly. Chances are, the interest rate on your car loans is lower than the CC interest.
Maximize the effect of paying down debt - pay off your cards (higher interest) and then the car loans = more bang for the buck
(Look at your purchase/loan agreement for the cars and check if there is a pre-payment penalty if you pay off early...)
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Old 04-04-2009, 12:07 AM
 
Location: Houston, TX
17,029 posts, read 30,766,528 times
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Car loans will have much lower rates 5-7% vs CC interest 18+%. You have the right idea about rolling over the payments, but which is the lowest remaining bill? Maybe make an effort to pay it off, then roll that payment into the others. I got out of cc problems that way...but it really accelerated when I paid off the car note of $400/mo.
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Old 04-04-2009, 12:45 AM
 
Location: Memphis
951 posts, read 3,697,213 times
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Quote:
Originally Posted by Oildog View Post
Car loans will have much lower rates 5-7% vs CC interest 18+%. You have the right idea about rolling over the payments, but which is the lowest remaining bill? Maybe make an effort to pay it off, then roll that payment into the others. I got out of cc problems that way...but it really accelerated when I paid off the car note of $400/mo.
Well see, thats my point. I have $500 in car loans and I can pay my CC debt off in a couple of months if I add that 500 to my 150. That' s way I am trying to pay down my car loans early.
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Old 04-04-2009, 12:48 AM
 
Location: Memphis
951 posts, read 3,697,213 times
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Quote:
Originally Posted by Elke Mariotti View Post
"CC payments are $150/mo" - that sounds like the minimum payment... No reason why you can't pay extra $$ on the cards and get rid of that debt quickly. Chances are, the interest rate on your car loans is lower than the CC interest.
Maximize the effect of paying down debt - pay off your cards (higher interest) and then the car loans = more bang for the buck
(Look at your purchase/loan agreement for the cars and check if there is a pre-payment penalty if you pay off early...)

No There are no penalty for paying off the car early. It is only a year and a half earlier then scheduled pay off date. I have actually never heard of a penalty for paying off your car early?
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Old 04-04-2009, 12:53 AM
 
Location: Long Island
9,916 posts, read 23,020,357 times
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Quote:
Originally Posted by redwine View Post
No There are no penalty for paying off the car early. It is only a year and a half earlier then scheduled pay off date. I have actually never heard of a penalty for paying off your car early?
I've seen it a couple of times, but not recently.

Again, if you pay off higher interest items first you save that extra interest and have more $$ to pay off car loans. Bottom line: less out of pocket $$ for you. Too tired to do a visual example
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Old 04-05-2009, 12:24 AM
 
3,459 posts, read 5,754,490 times
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In an ideal world, you'd want to pay off the highest interest rate debts first, but real life is anything from ideal.

The first thing to consider is that your car note is a secured loan, and if you can't make the payment they can take it away from you. It is also your biggest payment, so if you happen to lose your job you'll be happy to have it paid off.

The second thing to consider is maintaining your motivation. When I was trying to climb out of debt, I ignored the advice about paying the highest rates first, and chose to pay off the smallest balances first. Every time I paid off a bill, I was able to enjoy the sense of accomplishment, and had extra money in my budget to take on the next challenge. I might have paid a little more interest by doing it this way, but I think the price was worth it.

Do whatever you feel comfortable with.
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Old 04-05-2009, 12:30 AM
 
Location: Long Island
9,916 posts, read 23,020,357 times
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Quote:
Originally Posted by sterlinggirl View Post
In an ideal world, you'd want to pay off the highest interest rate debts first, but real life is anything from ideal.

The first thing to consider is that your car note is a secured loan, and if you can't make the payment they can take it away from you. It is also your biggest payment, so if you happen to lose your job you'll be happy to have it paid off.

The second thing to consider is maintaining your motivation. When I was trying to climb out of debt, I ignored the advice about paying the highest rates first, and chose to pay off the smallest balances first. Every time I paid off a bill, I was able to enjoy the sense of accomplishment, and had extra money in my budget to take on the next challenge. I might have paid a little more interest by doing it this way, but I think the price was worth it.

Do whatever you feel comfortable with.
The OP is trying to improve his/her credit score for purposes of obtaining a mortgage. IMHO different motivation from yours ?
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Old 04-06-2009, 01:12 PM
 
281 posts, read 1,004,549 times
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It's up to you how you want to do it - do whatever will motivate you to pay the debt off faster. I just downloaded a great spreadsheet that allows me to change the way payments are made, the amount I pay, etc. that has really helped me to organize everything. I found it to be much more customizable than the debt reduction calculators I found online. I downloaded it here - Free Debt Reduction Calculator for Excel

For me, if I pay the lowest balance loans first I will end up paying $600 more in interest (we have a substantial amount of debt), but they will both take the same amount of time. I actually set up a custom order of repayment because we have some credit cards which were balance transfers and the rates will be changing, so we want to get those paid first.

I'm not overly concerned about paying more in interest - I just want to find a payment plan that works for us so that we can just get rid of it.

Good luck!
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Old 04-07-2009, 11:14 PM
 
48,505 posts, read 96,476,720 times
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Quote:
Originally Posted by Elke Mariotti View Post
The OP is trying to improve his/her credit score for purposes of obtaining a mortgage. IMHO different motivation from yours ?
ee also need to realise that no matter what his income to debt ratio wil matter also. Paying any bedt is better but with teh same amount of moeny it is quicker to pay6 say a loan off at say 7% than the same amountat 25% . Paying credit card debt off will mean that you lower the amount owed quicker than a lower loan. That will improve both your credit rating and you income to debt ratio.
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