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Consolidating debts - Plan of action

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MACFRME
Frequent Contributor

Consolidating debts - Plan of action

Hello:

 

I was wondering if I could get y'alls opinions on how to pay off my partner and my revolving debts. We have stuff pretty spread out among a bunch of accounts right now. I would like for us to have fewer monthly payments to worry about. I'm not sure if consolidation or just paying them down, starting with the highest rates is the better option. Here are the debts:

 

(I am going to exclude the cards we PIF each month. They have small balances we always pay off) Theses debts below are long-term, due to some unforseen financial circustamces.

 

Partner

RBFCU Mastercard $10,893.37 / $11k (APR is 0% for th life of this balance). Min payment ($220)

USAA Mastercard: $5,123.88 / $7k (APR is 0% until September 2014, 17.9% thereafter) Min payment ($70)

Discover It: $4,081.47 / $4,750 (APR is 0% on a BT of $2k until 11/2014, purchases (remaing balance) will turn into 22.9% APR in June) Min payment ($90)

Chase Marriott Premier: $2,665.90 / $17.5k (APR is 15.99% currently on the entire balance) Min payment ($60)

 

Me

Chase Freedom: $4,723.50 / $5k (APR is 0% until March 2015) Min payment ($60)

Citi Simplicity: $9,643.08 / $12k (APR is 0% until June 2015) Min payment ($180)

 

Total balances: $37,190.69 ~ about 15 or months of payments based on the budget

 

I would like to avoid AA while we pay down these balances, because we are not in a bad place financially, we just need to catch up on these bills. We haven't been late, but I don't consider them "caught up" until they are all PIF'd. The budget we are working with to pay on these each month is $2,500. What order do you think we should pay these cards down? How much above the minimum should we be allocating to the cards which aren't at the top of the list of payoff priorities? Do you think twice the minimum is a good amount?

 

Here's what I am doing currently (priority-wise):

 

1. Marriott ($1,600) until paid

2. Discover It ($150 payment)

3. USAA ($100 payment)

4. Chase Freedom ($100 payment)

5. Citi Simplicity ($300 payment)

6. RBFCU - ($250 payment)

 

Thanks in advance for the help!

 

 

Cards I Carry
$7.5K $23K $5k $300(SEC) $500 $300 $1,500 $800 $800
Total Available Credit: $39.7k | FICOS: EX 659 | EQ 661 | TU 673
Message 1 of 10
9 REPLIES 9
takeshi74
Senior Contributor

Re: Consolidating debts - Plan of action

If you want to avoid AA then you need to get the utilization down on the cards as quickly as possible.  I don't recall the brackets that have been posted but one of your partner's cards is at 99% and you definitely need to get that down so it's not regarded as maxed out (IIRC a serious ding -- more so than just high utilization).  The longer you leave a card with high utilization the greater the odds of AA.

 

Quick Googling yielded this for me:

  • <10%
  • 10 – 19%
  • 20 – 29%
  • 30 – 49%
  • 50 – 84%
  • 85 – 100%

I'd suggest getting your cards down the various brackets as quickly as possible to avoid AA.  Calculate utilization for each and prioritize the higher ones.  If the brackets above are all correct then get them all under 85% first.  Once they're all under 50% you might then want to start worrying over paying off higher APR's first but I'm just guessing here.  This topic's fairly common and you might want to refer to other threads on the matter:

https://www.google.com/search?q=debt+repayment+apr+utilization+site%3Aficoforums.myfico.com&oq=debt+...

Message 2 of 10
Creditaddict
Legendary Contributor

Re: Consolidating debts - Plan of action

1. Have either of you ran the pre-qual at chase to see if you get offered a Slate?

2. I know the RBFCU is maxed and as other poster stated to pay that down first but it's 0% for life so I actually would pay that last! just make sure to stay under credit line.

 

If you are okay with your partners credit being paid off first or to pay a couple off and then see about another 0% in his name and then BT your cards then I think your plan of payment order is best.

 

How new is that Marriott card, with a limit like that and if it's fairly new I would think he could get another chase and consolidate some of the others.

Message 3 of 10
MACFRME
Frequent Contributor

Re: Consolidating debts - Plan of action

I just wanted to update this thread with some new information. I found out we could use retirement savings to pay down these debts, so we took out our contributions from our roth IRA (tax and penalty free) and a loan from another one for a total of $10,500 to go towards these debts. I also did some BTs. Here is the new balance sheet:

 

Partner

RBFCU: $5,044/$11,000. 7% APR.

 

Me

Chase Freedom: $8963/$10,000. 0% APR until 4/2015.

Simplicity: $10,790/$12,000. 0% APR until 7/2015.

 

Total debt: $24,797.00

 

Since we have about $2,500 a month to pay on this stuff, I figured I would pay them like this:

RBFCU - $300 per month

Chase - $1,100 per month

Citi - $1,100 per month

 

It feels good to be paying this stuff off finally!

Cards I Carry
$7.5K $23K $5k $300(SEC) $500 $300 $1,500 $800 $800
Total Available Credit: $39.7k | FICOS: EX 659 | EQ 661 | TU 673
Message 4 of 10
Crisis
Established Contributor

Re: Consolidating debts - Plan of action


@MACFRME wrote:

I just wanted to update this thread with some new information. I found out we could use retirement savings to pay down these debts, so we took out our contributions from our roth IRA (tax and penalty free) and a loan from another one for a total of $10,500 to go towards these debts. I also did some BTs. Here is the new balance sheet:

 

Partner

RBFCU: $5,044/$11,000. 7% APR.

 

Me

Chase Freedom: $8963/$10,000. 0% APR until 4/2015.

Simplicity: $10,790/$12,000. 0% APR until 7/2015.

 

Total debt: $24,797.00

 

Since we have about $2,500 a month to pay on this stuff, I figured I would pay them like this:

RBFCU - $300 per month

Chase - $1,100 per month

Citi - $1,100 per month

 

It feels good to be paying this stuff off finally!


No offense, but taking out of your retirement was ... I don't want to say stupid.. but, it was not a smart thing to do.   Actually, I do want to say it was stupid.  Yes, it was penalty and tax free, but do you realize the interest you're giving up.  You had a concrete payment plan that YOU determined, that you decided was workable, and that you said you could pay off in about 15 months, a very short span for $35k in debt. 

 

I'm not one to advocate maintaining that level of debt, but if you truly wanted to make a dent in it, there are a lot of things you could do without risking your retirement. 

 

Here's some additional information

In the garden until debt is paid off and scores are up!
Message 5 of 10
MACFRME
Frequent Contributor

Re: Consolidating debts - Plan of action

The rate of return on the two retirement accounts was not great, and we have some concrete goals we are trying to meet by getting out of this revolving debt.

 

We want to buy a house within the next year. We need the credit score boost and extra monthly income from not having this debt in order to afford the house we want. The IRA money would either have been used for the house down oayment or to pay the debt. My partner and I are both in our twenties, so these IRAs are not something we absolutely need in the near future anyway. Needless to say, this was not a rash decision that was made quickly and without any premeditation. It was not stupid.

Cards I Carry
$7.5K $23K $5k $300(SEC) $500 $300 $1,500 $800 $800
Total Available Credit: $39.7k | FICOS: EX 659 | EQ 661 | TU 673
Message 6 of 10
myjourney
Super Contributor

Re: Consolidating debts - Plan of action

Before you app think...
Have you done your research of the CC?
Does it fit your spending?
Do you have a plan for the bonus w/o going into debt?
Can you afford the AF?
Do you know the cards benefits? Is it worth the HP?
Message 7 of 10
WillTeasle
Established Contributor

Re: Consolidating debts - Plan of action


@MACFRME wrote:

The rate of return on the two retirement accounts was not great, and we have some concrete goals we are trying to meet by getting out of this revolving debt.

 

We want to buy a house within the next year. We need the credit score boost and extra monthly income from not having this debt in order to afford the house we want. The IRA money would either have been used for the house down oayment or to pay the debt. My partner and I are both in our twenties, so these IRAs are not something we absolutely need in the near future anyway. Needless to say, this was not a rash decision that was made quickly and without any premeditation. It was not stupid.


Compound interest is still a powerful thing.  Definitely try to pay that money back in to the retirement accounts as soon as possible.  The earlier you get it in, the more chance it has to work for you.

Last HP: 01/10/19 | Latest Scores: EQ FICO8 - 850 | TU FICO8 - 850 | EX FICO8 - 850
Amex BC | Amex HHonors | Amex HHonors Aspire | Amex Marriott Business | Amex Platinum | BoA Alaska Airlines | CF | CFU | CSR | Chase Ink+ | Citi DC | Citi AA UP | Discover IT
Message 8 of 10
USF813
Frequent Contributor

Re: Consolidating debts - Plan of action

OP, I don't think applying for more credit is the answer. In fact, I think that would be counterproductive over time. I'd start by paying down the cards with the highest rate at this time.
Message 9 of 10
john398
Senior Contributor

Re: Consolidating debts - Plan of action


@WillTeasle wrote:

@MACFRME wrote:

The rate of return on the two retirement accounts was not great, and we have some concrete goals we are trying to meet by getting out of this revolving debt.

 

We want to buy a house within the next year. We need the credit score boost and extra monthly income from not having this debt in order to afford the house we want. The IRA money would either have been used for the house down oayment or to pay the debt. My partner and I are both in our twenties, so these IRAs are not something we absolutely need in the near future anyway. Needless to say, this was not a rash decision that was made quickly and without any premeditation. It was not stupid.


Compound interest is still a powerful thing.  Definitely try to pay that money back in to the retirement accounts as soon as possible.  The earlier you get it in, the more chance it has to work for you.


Stocks have not been that great this year, I only have a .5% return or so Smiley Sad

Message 10 of 10
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