Pay off installment loan or 4 credit cards

[kshurika]

I agree with SouthJamaica and a few others that you're not ready to buy a house (no "perhaps" about it). You will just dig yourself into a deeper hole until the debt becomes so onerous you won't be able to do renovations to your house, or even to enjoy it. Your $5,100 is being eaten alive by the high interest you're paying on your credit cards. You may think you have a small amount saved towards the future down payment on a house, but, right before your very eyes that amount is getting smaller and smaller with every passing day that you're accruing such huge interest.

I tried to read the various multilevel plans presented to you under this topic but, because I have some form of ADD, I quickly went into the MEGO state (My Eyes Glaze Over). So, presented here for your consideration is Plan K:

1. Throw every cent of your $5,100 at your CC debt immediately, starting with the highest interest cards. Get rid of 30% of that debt in one flash. Watch your Util go down and your credit scores go up.

2. Don't incur any more CC debt. Self-control is needed here.

3. You don't need a safety cushion now. Your amount of CC debt deflates that cushion instantly. You have the beginnings of a bottomless financial pit that so many have dug for themselves (but you're not there yet; not even close). You need to pay off debt and not acquire new debt. Then, embroider your safety cushion.

4. Go to a bank or CU and inquire about a consolidation loan that would pay off in full the remainder of your CC debt and greatly reduce the interest you pay. This will not only get your finances under better control; it will eventually raise your credit scores even more.

5. With the same discipline you've shown to save for a house, make a plan to reduce whichever of your two installment loans has the higher interest.

6. With steps 1 through 5 completed fully and your other installment debt under control, start saving for and shopping for a house. You'll sleep in it peacefully.

Plan K is drastic, but it will save you a lot of money and grief. Best of luck.

[Anonymous]

Deciding to apply for a mortgage while you have CC debt isn't a smart move IMO.  Simply pay off the CC debt first, then move on to the mortgage.  From the sounds of the OP, this may only actually take a handful of months (say 6, tops) longer to accomplish based on his CC debt and income that he has available to put toward it.  Not only would it look better going into the mortgage app with no CC debt (better profile, better scores) but it would just "feel" a lot better on your end not having any CC debt weighing on your mind when you're now taking on a monthly mortgage payment.

[kshurika]

BBS said it a LOT more concisely than I did.

[Anonymous]

Wow lots of great info here. I'm listening and I really appreciate it.  The consensus seems to be I am not ready for a house. That really stings but I get the reasoning behind it. I did the "is it better to rent or buy" calculator and it told me buying is best.  I'll take personal, human advice over the computer. So I'm going to take $3000 of the $5000 TODAY and put it on credit cards 3 and 4. I put my credit cards on ice 3 months ago when I started this plan so I won't make any new debt. I know I should use the entire $5000 but its honestly  a mental thing seeing it in my account. If I'm being incredibly irrational (or dumb) about that, throw the hard truth at me and I'll reconsider. But if its okay to leave the $2000 I just won't add any more money to it until all the debt is clear. With my next paycheck, I'll focus on card 1. 

Thank you Kshurika for plan K and to BBS for telling me a big NO on the house. I need honesty and tough words. I'll update my progress in 6 months. 

[HeavenOhio]

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@Anonymous wrote:

I at least know for sure not to focus on the installment loan which honestly that's where I was going to start before the advice.

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Credit card debt is much more harmful to one's score than installment debt. I'd surmise that it's because credit cards are a "help yourself" kind of debt while a loan has been vetted by a computer, a banker, and the customer to make sure that it fits into one's budget. Loans seem to be relatively neutral in terms of scoring, and when they're mostly paid off, they can actually become a positive.

Note that paying off one's only installment loan entirely can hurt several flavors of FICO scores, including FICO8 and (I believe) one of the mortgage scores. If you feel inclined to put extra money toward your loan once your card debt has been addressed, make sure you come back here for advice on the best way to do it.

[dynamicvb]

It sounds like you have decided to wait on the house, which I think is probably a good idea. I also agree with everyone saying to pay down your highest interest cards to get that utilization down.

the one thing I have not seen mentioned is for 300k, you would need around 10.5k for a down payment on an FHA which I believe is about the lowest DP on any of the convential loans and you could need 15-20% down depending on the bank. There may still be banks that will do the zero down on a mortgage, but I’ve come to the conclusion that just does not make good sense from a personal finance stance. Then there are also closing costs, moving expenses, etc that are also involved. Not to mention you will want a new living room or bedroom to go with it. Blinds decorations, etc.

i would factor in all these types of items into the mix too.

[Anonymous]

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@AnonymousThe consensus seems to be I am not ready for a house. 

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Not ready may be putting it a bit harsh, as it gives a tone (IMO) that you may not be ready for a while.  A better phrase I feel would be you aren't in the best [financial] position for a house at this moment.  Realistically it seems like you could have that debt squared away in 6 months, maybe even sooner.  I'd say you aren't far off from being in a good place, so I'd look at this as more of a positive thing rather than a negative one.