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Which should I pay off?
Posted on 2/23/20 at 9:15 pm
Posted on 2/23/20 at 9:15 pm
26k truck note or 15k in other debt?
This is money that I’ve saved up over the past couple of years. It does not include my reserve fund. I initially was going to pay off my truck ($580 a month) with it then roll that payment into paying off some other smaller debt. This way I’d lose a car payment and within the next year have all the other debt paid as well. This option would require 90% of my savings though. The other option is to keep the car note and pay off the smaller debts which would require about 60% of my savings. Smaller debt includes 2 credit cards, one which is interest free for 10 more months, and some no interest for 4 years credit lines. But the second option would push me paying my truck off for about 2 more years.
This is money that I’ve saved up over the past couple of years. It does not include my reserve fund. I initially was going to pay off my truck ($580 a month) with it then roll that payment into paying off some other smaller debt. This way I’d lose a car payment and within the next year have all the other debt paid as well. This option would require 90% of my savings though. The other option is to keep the car note and pay off the smaller debts which would require about 60% of my savings. Smaller debt includes 2 credit cards, one which is interest free for 10 more months, and some no interest for 4 years credit lines. But the second option would push me paying my truck off for about 2 more years.
4
Posted on 2/23/20 at 9:27 pm to GAFF
Depends on the interest rate of each
Posted on 2/23/20 at 9:31 pm to iAmBatman
Dave Ramsey says pay of the smaller debt first
Posted on 2/23/20 at 9:31 pm to iAmBatman
Truck is 4.8, one credit card is 19% the interest free one is 15% and the other smaller interest free debt ranges from 4.5 to 12%.
Posted on 2/23/20 at 9:39 pm to Double Oh
quote:
Dave Ramsey says pay of the smaller debt first
Agreed. The debt snowball has you rank them from lowest balance to highest balance, pay ONLY the minimum on all but the lowest - throw everything at the lowest, then move on to the next one.
Posted on 2/23/20 at 9:40 pm to GAFF
Payoff 19% one tomorrow. The way you explained the rates on the others confused me. If a card is internet free now, but will be double digits at at some point in the future, pay that off before you’re paying double digit interest l. The truck note rate isn’t great, but I would just keep paying it monthly, get rid off all other debt and invest difference
Posted on 2/23/20 at 9:42 pm to GAFF
If committed to paying them off (i.e. you won't run up credit cards again) on schedule you said, why not pay off higher interest rate first?
Posted on 2/23/20 at 9:42 pm to Ace Midnight
What if you owe $20,000 on a car note at 1.9% and 20,500 at 15% on a credit card. All situations are different the snowball method is simple for simple people
Posted on 2/23/20 at 9:49 pm to 3morereps
quote:
What if you owe $20,000 on a car note at 1.9% and 20,500 at 15% on a credit card.
Now you're being silly.
quote:
All situations are different the snowball method is simple for simple people
It is. It is for people who absolutely need help and it will work for virtually anyone who is in over their head.
It is not a min/max, A/B perfect net outcome analysis. It is about psychology and momentum. Folks who can formulate, follow and complete such an analysis rarely get that far into trouble in the first place.
It is very similar to what goes on with gambling (that also ties into the same areas of the brain involved with addiction) with the whole gratification/reward dynamic in the brain. And it absolutely will work for virtually everyone who follows the program.
Posted on 2/23/20 at 11:31 pm to Double Oh
Dave Ramsey is a fricking joke
Posted on 2/24/20 at 8:41 am to GAFF
quote:Pay this one off ASAP
one credit card is 19%
quote:Say what?
the interest free one is 15% and the other smaller interest free debt ranges from 4.5 to 12%.
Posted on 2/24/20 at 10:12 am to iAmBatman
quote:
Dave Ramsey is a fricking joke
This used to be my default reply as well because most of his advice is not the most mathematically efficient. However, his advice is just as much a mental and emotional process as it is mathematical. Dave is good for people who are terrible at managing money, not for those looking to maximize their earning potential.
Posted on 2/24/20 at 3:10 pm to prostyleoffensetime
quote:
Say what?
My credit lines that are currently in a no interest promo date will be 15% to 4.5% when that promo date expires
Posted on 2/24/20 at 3:16 pm to GAFF
Pay off your highest interest items first.
Posted on 2/24/20 at 3:55 pm to GAFF
My personal preference would be to pay off the $15k, and then aggressively pay down the truck.
But why accumulate the $15k in debt if you had the ability to put more than that into savings (after emergency funds)?
Will you need that $15k in liquid assets soon for a mortgage down payment or such?
But why accumulate the $15k in debt if you had the ability to put more than that into savings (after emergency funds)?
Will you need that $15k in liquid assets soon for a mortgage down payment or such?
Posted on 2/24/20 at 4:58 pm to GAFF
quote:
26k truck note or 15k in other debt?
quote:
Truck is 4.8, one credit card is 19% the interest free one is 15% and the other smaller interest free debt ranges from 4.5 to 12%.
Honestly Dave Ramsey is what you need.
Posted on 2/24/20 at 5:56 pm to GAFF
It may be helpful to clarify for the board what your goal is in this decision.
If you’re asking simply about savings related to interest expenses, you can calculate how much interest will accrue on each separate debt in the time frame until it’s paid off.
If you can comfortably pay off the promo balances before the high interest rates kick in, with the money that you previously used to pay the truck note, that seems like it would be ideal.
If you pay off the credit card debts and continue paying your truck note, you may pay marginally more in interest than paying it off. That depends on long has the truck been financed and how long is left on the note.
On the flip side, if you pay off the truck and can’t pay the full promo balances by the time the interest kicks in, the higher interest rates are going to bite you long term. Also, not sure of the details of your promo plans, but I understand some of them tack on all the interest retroactively if you don’t pay them off by the end of the promo period. That’s something to consider, too.
If you’re asking simply about savings related to interest expenses, you can calculate how much interest will accrue on each separate debt in the time frame until it’s paid off.
If you can comfortably pay off the promo balances before the high interest rates kick in, with the money that you previously used to pay the truck note, that seems like it would be ideal.
If you pay off the credit card debts and continue paying your truck note, you may pay marginally more in interest than paying it off. That depends on long has the truck been financed and how long is left on the note.
On the flip side, if you pay off the truck and can’t pay the full promo balances by the time the interest kicks in, the higher interest rates are going to bite you long term. Also, not sure of the details of your promo plans, but I understand some of them tack on all the interest retroactively if you don’t pay them off by the end of the promo period. That’s something to consider, too.
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