Pay off strategy

[whydoineedaname]

So...  There are several pay off stratagies out there.  Snow ball - High Interest vs high ballance etc..

What I am looking to do is A. Pay off what I owe. B. Improve my credit over the short/Long run...

You all kknow how student loas are broken up,  Each Semester a differnt loan with different rates.  Due to this and that happening almost all of my loans are top heavy, after a forbarance or two not making any payments I owe more than they were taken so this screws with things a bit.

Would you Pay off your low hanging fruit just for the satisfaction of having it paid off or would you go for the Bigger ones to get the owed to borrowed down?  It seems like my lower ballance loans are lower rates and my higher ballance one are higher ballance.  I am not to concerned in how much interest I will save doing one vs the other as it is a very small amount of difference.

Then my largest debt is the car we just baught...   But it also has the lowest interest rate by 3-5%.   I would rather tackle the Student loans first.

For credit cards I am carrying a VERY SMALL AMOUNT on them.  I am not to worried about paying them off as they are basicly paid in full/so low of a ballance.

[Anonymous]

FIrst thing I'd do is tie down the issue of revolving vs. installment, and the fact that installment debt affects your score differently than revolving.

Since installment debt is handled differently for utilization and scoring, I think I'd go for the highest APRs first.

[takeshi74]

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@whydoineedaname wrote:

For credit cards I am carrying a VERY SMALL AMOUNT on them.

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Small and large don't really mean much since they're such subjective terms.  Give us some percentages on loan to balance and revolving utilization.

[bdhu2001]

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@takeshi74 wrote:

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@whydoineedaname wrote:

For credit cards I am carrying a VERY SMALL AMOUNT on them.

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Small and large don't really mean much since they're such subjective terms.  Give us some percentages on loan to balance and revolving utilization.

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+1 but I'll add that, from my experience, pay off the low balance and don't charge them back up. I've tried highest interest rate, but never was sucessful until I went snowball.  In addition, put a payment plan together (there are apps for it or you can use the "Mint" site), and stick to it.  When you charge on a card that's in your plan (it will happen) pay the amount in your plan + the amount you charged.  After you calculate all this, join the fitness challenge listing your new goal & let us know how you're doing along the way.

[whydoineedaname]

Small in this case means the $50 or so from fuling up the car or waiting for it to clear so that I can send an instant payment.  Credit cards are being used like debit cards just so I can rake in the points :-)  So small is at any given time less than $100 and the limits are listed below in my signature.

[SomeGuyOnTheWeb]

Generally, you're better served paying the higher interest rate loans first.

However-- and I did this purely for personal satisfaction-- I had a few small balance student loans (~$500 and $1,200, respectively) with low interest rates that I paid off just to see them as "paid in full".

[bdhu2001]

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@SomeGuyOnTheWeb wrote:

Generally, you're better served paying the higher interest rate loans first.

However-- and I did this purely for personal satisfaction-- I had a few small balance student loans (~$500 and $1,200, respectively) with low interest rates that I paid off just to see them as "paid in full".

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I agree that you're better served paying off high interest 1st;  but statistically, people tend to actual stick to or maintain paying off small ballances first.  It may be the psychological advantage of actually seeing progress, but it tends to work.

I personally use a combination of both, with a spread sheet. Make a tab for Jan of the previous year and every month, showing month end balances, for the current year.  Looking at previous years or months show me that I'm progressing even if something happens (new air conditioning) & I have to take a step back.