RainbowSprinkles Posted October 26, 2009 Share Posted October 26, 2009 .... which debt would you apply it to? the one with a high minimum payment, or the one that has a low minimum payment and would be paid off within the next 2-3 months? Quote Link to comment Share on other sites More sharing options...
SonshineLearner Posted October 26, 2009 Share Posted October 26, 2009 Usually, I've heard low and roll into the next one, unless you are so close to the maximum on your debt level with the high... that you'd worried it's gonna make it jump interest wise... Carrie Quote Link to comment Share on other sites More sharing options...
Lovedtodeath Posted October 26, 2009 Share Posted October 26, 2009 I would determine it based on how much of my payment was going toward interest. Quote Link to comment Share on other sites More sharing options...
Stacie Posted October 26, 2009 Share Posted October 26, 2009 .... which debt would you apply it to? the one with a high minimum payment, or the one that has a low minimum payment and would be paid off within the next 2-3 months? Personally, I'd put half into an emergency fund (assuming you don't already have one) and put the other half toward the one I can pay off soonest. Then roll the monthly amount to the higher one and pay it off faster. Quote Link to comment Share on other sites More sharing options...
Julie in Monterey Posted October 26, 2009 Share Posted October 26, 2009 The one with the highest interest. If you can, double or even triple that payment while making minimum payments on the others. Once the first cc is paid off, make the same payment you made on the one you paid off plus your minimum on the next cc with the next highest interest. It keeps snow balling until you are making huge payments (because once you pay one off you keep making that payment and applying to the next card in need) and paying off quickly. Oprah.com has a great page with similar financial advice. Good luck! Julie in Montere Quote Link to comment Share on other sites More sharing options...
Barb_ Posted October 26, 2009 Share Posted October 26, 2009 I know this goes against conventional wisdom, but I would put it toward whatever gave me the biggest psychological kick. Say you have $1000 to spend. You have a credit card with $8500 on it and maybe a furniture bill or something with $750 left on it. The $1000 against the $8500 may just seem like a drop in the bucket and paying off the $750 may feel great and energize you to get that credit card paid off EVEN FASTER. Then again, you might feel better knowing you put it toward the credit card since the furniture bill will be paid off in a couple of months anyway. Only you know which will make you feel better. Barb Quote Link to comment Share on other sites More sharing options...
Tap Posted October 26, 2009 Share Posted October 26, 2009 I would get rid of the one that I can pay off fastest. Unless there is a huge interest difference like 30% vs 5%. The interest savings probably won't be that significant. If you do end up in a problem later, and can't pay the debt, I would rather owe one person than two. I also would rather have one late payment fee, piling up, instead of two. It also is simpler for me to pay extra if I have one bill to pile it on. I don't know why, but my brain just works that way. I don't get the same kick out of paying minimum or small payments to debts...I do paying big payments. Quote Link to comment Share on other sites More sharing options...
Barb_ Posted October 26, 2009 Share Posted October 26, 2009 I would get rid of the one that I can pay off fastest. Unless there is a huge interest difference like 30% vs 5%. The interest savings probably won't be that significant. If you do end up in a problem later, and can't pay the debt, I would rather owe one person than two. I also would rather have one late payment fee, piling up, instead of two. It also is simpler for me to pay extra if I have one bill to pile it on. I don't know why, but my brain just works that way. I don't get the same kick out of paying minimum or small payments to debts...I do paying big payments. Yeah, I feel similarly. The excitement you feel as you pay off each debt is a big part of the motivation to keep going. Do what suits you. Barb Quote Link to comment Share on other sites More sharing options...
AuntieM Posted October 26, 2009 Share Posted October 26, 2009 (edited) It's a snowball, starting with your smallest balance first. Pay the monthly minimum on all other debts and throw all you've got at the smallest one. Once that is eliminated, move to the remaining lowest balance. With the first debt gone, the amount extra you have to throw at the next will be larger, so hopefully it will go quick. Then when that is gone, attack the next remaining low balance, and so on. By doing the lower balances (instead of the lower interest rates), you can really see - and feel, emotionally - that you are making progress. If you are getting aggressive about paying off debt, and hope to have it all gone within 2 years or so, the interest differentials won't make a significant difference. Personally, the only way I'd not plan my payoffs this way would be if one of the debts I owed was to a family member, for the sake of the relationship. I'd think about working on that one first, maybe, if the balance was only a bit larger. If you do have a huge variance in interest rates (ie, most things around 5-8%, but one at 18% or more), I'd suggest you call that 18% creditor(s) and try to renegotiate the rate on that particular debt. DH has done this a number of times, saying (with a very polite and friendly voice), "X%? Is that the best you can do? Such-and-such company is offering me a new card with a 2% rate for balance transfers*, don't you want to talk to your manager and see if you guys can match that rate before I take my business elsewhere?" It's worked a number of times for him. I don't usually recommend the shifting-credit-card game, but I think it's okay when you are setting up your debt snowball plan. You are going to feel great when the debt is gone! ETA" *He always had a legitimate offer for this in his hand, he wasn't just making this up. Edited October 26, 2009 by AuntieM Quote Link to comment Share on other sites More sharing options...
Seeker Posted October 26, 2009 Share Posted October 26, 2009 (edited) I would not be considering the minimum monthly payment at all, unless it was more like I did not have the money to pay both together. If both debts were about the same in amount, I would go with paying the highest interest off first. Well, actually, I would be opening credit card with a 0% introductory offer to transfer it, but that is just me and definitely not something Dave Ramsey would advise. I am of the mindset that while I have a good FICO score, I am going to use it to my advantage and not pay even a dollar more in interest if I can help it. I want every dollar I put towards my debt actually going towards my debt and not towards interest that is increasing my debt each month, but I do the math so that the transfer fees do not end up costing more than the best interest rate I can get. This motivates me far more than seeing those monthly interest fees! If I could pay off a low interest one in just a few months, I would do that one first and then attack the bigger debt with higher interest even if I did not transfer it to a 0%. In the end, you may pay a few dollars more, but it really is worth it to be able to focus on a single debt rather than two. Edited October 26, 2009 by Seeker Quote Link to comment Share on other sites More sharing options...
Kim in Appalachia Posted October 26, 2009 Share Posted October 26, 2009 I know this goes against conventional wisdom, but I would put it toward whatever gave me the biggest psychological kick. Say you have $1000 to spend. You have a credit card with $8500 on it and maybe a furniture bill or something with $750 left on it. The $1000 against the $8500 may just seem like a drop in the bucket and paying off the $750 may feel great and energize you to get that credit card paid off EVEN FASTER. Then again, you might feel better knowing you put it toward the credit card since the furniture bill will be paid off in a couple of months anyway. Only you know which will make you feel better. Barb :iagree: I would probably do the one with the smaller amount because the satisfaction of having it completely paid off would outweigh anything else, even if the other debt had the higher interest rate. Quote Link to comment Share on other sites More sharing options...
Nestof3 Posted October 26, 2009 Share Posted October 26, 2009 It would be a toss-up between the one I could pay off completely and the one with the highest interest accumulated per month. The first would be for psychological reasons. I would also call all credit card companies and ask for a lower rate, and I would combine them if I could. Quote Link to comment Share on other sites More sharing options...
Allearia Posted October 26, 2009 Share Posted October 26, 2009 I would pay off the highest interest first if it was significantly higher. I understand the psychology of paying the lowest balance first, but just can't get past the numbers. In our situation, when I did a spreadsheet comparing paying off the lowest balance vs highest interest we would save several thousand dollars doing the highest interest first. It depends a lot on how long it wil take you to pay off everything and how different interest rates are. http://www.vertex42.com/Calculators/debt-reduction-calculator.html Quote Link to comment Share on other sites More sharing options...
justamouse Posted October 26, 2009 Share Posted October 26, 2009 My house. And I plan to. We've been in our house 8 years and have paid only 7k on the principal of our house. So, we've paid roughly 108,000 in interest. Heh. I can't think about hat any more, it make me nauseous. We don't carry credit card debt, but if you do, pay off the highest interest first and the roll that monthly budgeted $ into the next card. Quote Link to comment Share on other sites More sharing options...
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