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Should I use extra money to pay down credit card or student loan

Regular Contributor

Re: Should I use extra money to pay down credit card or student loan

If you plan on paying the CC debt before the end of the promo date, then do the student loans based on interest rates. If the rates are the same, pay the smallest balance first as that will give more extra cash when paid off.

If you don't plan on having the CC debt paid normally in time, pay it first. Because the interest will probably be deferred and therefore it may be tough to pay off when the bill drops 1 year-18 months worth of interest on you. Let alone, CC interest is about 7 times as much as your loans as they are.
Message 11 of 21
Valued Contributor

Re: Should I use extra money to pay down credit card or student loan

The CC interest is not being deferred unless it was on a Best Buy or other type retail card.

 

I would say on the 0% interest debt, divide into equal payments to pay it off as the 0% expires. 

 

Also, do you use a budget? If not, this would be a great time to start. Right now while your financial house is in good order start by using a budget. Talke a look at YNAB (You Need a Budget) and see what you think.

Message 12 of 21
Super Contributor

Re: Should I use extra money to pay down credit card or student loan


smile90000 wrote:

I have been stewing on this question for a few months now and I just need help. 

 

My credit scores are in the 775 to 790 depending the bureau. 

 

I have

Credit card debt of 3200 - 0% until January 2018. The company has sent me offers for balance transfers to extend this to end of 2018 if I choose.

 

Student loan debt

3 loans all at 3.83 (but variable interest rate and it has been slowly going up). These are private and the final payment is due Oct 2018 (this can't be extended so this is the deadline).

 

1300

1700

2200

 

I have about an extra 150 I can put toward something every month.

 

Should I pay down the 0% credit card, or put it toward the student loans (if I do that I would probably have two paid off by the end of the year). 

 

I might need a new car in the next twelve months...it is better to pay the credit card and inch my score up? Or should I pay off the two loans which would be two less debts on my file? 

 

I'm so confused!Smiley Frustrated

 

Thanks!

 

 

 


To answer your question we would need to know:

 

1. What is the credit limit on the credit card

2. What are the original amounts of the loans

3. What is your objective? Save money? Boost FICO Auto Scores for car loan? Boost FICO 8?

4. Are there other open credit card accounts

FICO8 EQ 721 TU 772 EX 769 Total revolving credit 500k
Message 13 of 21
Community Leader
Valued Contributor

Re: Should I use extra money to pay down credit card or student loan


snu wrote:

 

Edit: Also, don't know if you can do this with private student loans, but is it possible to reconsolidate them and get a fixed interest rate?


Yes.  I've done this several times, both variable and fixed.  Unfortunately rates are rising rather quickly - last year would have been the most opportune time for a fixed rate.  Also, the OP only has a little over $5k in student loans - I am not aware of any banks that will refinance such a small amount (there are usually $15-20k minimums) and it's likely not worth the trouble.


$500k+ club. | FICO 08 [Nov 2017]: EQ 743 EX 741 TU 743 | World's worst gardener.
Message 14 of 21
Community Leader
Epic Contributor

Re: Should I use extra money to pay down credit card or student loan

I would also consider your current % util on your credit cards as a factor.

 

If your % util remains high over a period of time, that can trigger evaluation for a credit limit decrease.

If they decrease your credit limit, then you wont get a reduction in % util as you pay down the debt.

What is your current % util, and if high, how long has it been at a high amount?

Message 15 of 21
New Member

Re: Should I use extra money to pay down credit card or student loan

This is all a learning process for me too, but I would suggest paying off the higher interest rates first.

Message 16 of 21
Valued Member

Re: Should I use extra money to pay down credit card or student loan

Thanks everyone for the replies. 

 

Someone asked the credit card utilization is at 23%. I don't use the card at all. I got it to pay for expenses related to my mother's death and that was it. The utilization keeps going down because they keep increasing my available credit, even though I'm not using the thing!  

 

I have two other credit cards but don't carry balances on those cards. 

 

Right now I'm in a position to pay off the credit card and actually the student loans BUT that would leave me cash low and I don't have a safety net (unmarried. parents deceased, etc), so $150 extra is all I'm comfortable spending each month.

 

I was fine going as is, but the interest rate is starting to creep up on the student loans and I'm scared like crazy that my student loans will be sold to some scary company like Navient before Septermber 2018 (their absolute payoff date)  AND there is the issue of the car.

 

My car is pretty old (almost 15), I will wear it into the ground but I'm concerned if I will be approved for another one because my income is low and I'll have these three installment loans. My thinking was if I paid them off then my credit union might be more lenient. 

 

Is my on this thinking incorrect? 

 

Message 17 of 21
Highlighted
New Contributor

Re: Should I use extra money to pay down credit card or student loan

Can you get a balance transfer from one of your cards?

Citibank often offers a transfer for 3% and 0APR for 12-18 months.

you could pay off all that you owe and consolidate onto one card so you only have the one pmt and with the 0apr for a while give  you a chance to get it paid without it continuing to compound interest

TU FICO average 819
Message 18 of 21
Super Contributor

Re: Should I use extra money to pay down credit card or student loan


smile90000 wrote:

Thanks everyone for the replies. 

 

Someone asked the credit card utilization is at 23%. I don't use the card at all. I got it to pay for expenses related to my mother's death and that was it. The utilization keeps going down because they keep increasing my available credit, even though I'm not using the thing!  

 

I have two other credit cards but don't carry balances on those cards. 

 

Right now I'm in a position to pay off the credit card and actually the student loans BUT that would leave me cash low and I don't have a safety net (unmarried. parents deceased, etc), so $150 extra is all I'm comfortable spending each month.

 

I was fine going as is, but the interest rate is starting to creep up on the student loans and I'm scared like crazy that my student loans will be sold to some scary company like Navient before Septermber 2018 (their absolute payoff date)  AND there is the issue of the car.

 

My car is pretty old (almost 15), I will wear it into the ground but I'm concerned if I will be approved for another one because my income is low and I'll have these three installment loans. My thinking was if I paid them off then my credit union might be more lenient. 

 

Is my on this thinking incorrect? 

 


If you want to get an auto loan and want to maximize your scores in order to get the lowest rate, you should:

 

1. make sure 2 of the credit cards report a zero balance, while the 3rd reports a small balance

 

2. pay each of the loans down to 9% of the original amount

FICO8 EQ 721 TU 772 EX 769 Total revolving credit 500k
Message 19 of 21
Established Member

Re: Should I use extra money to pay down credit card or student loan

I agree with others posting to pay off the ones with interest pending you have a 6-8 month emergency fund already in case something unexpected happens. If you already have this money set aside then pay off the ones with interest. Dont touch your emergency fund.

Message 20 of 21