What to pay off?

[Anonymous]

I paid my taxes today. Bad news is I have $26,000 in 14% credit card debt and $37,000 in 12.99% personal loan debt. I’m going to sell about $15,000 worth of gold to a dealer. My utilization is just under 30%. My Fico is 730 my Vantage is 670. Everything is current but my debt payments total $1700 per month. My income is $4300 tax free per month. What should I pay first?

[SouthJamaica]

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@Anonymouswrote:
I paid my taxes today. Bad news is I have $26,000 in 14% credit card debt and $37,000 in 12.99% personal loan debt. I’m going to sell about $15,000 worth of gold to a dealer. My utilization is just under 30%. My Fico is 730 my Vantage is 670. Everything is current but my debt payments total $1700 per month. My income is $4300 tax free per month. What should I pay first?

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I would need to know

(a) what your goal is,

(b) the loan balances and original loan amounts

(c) the credit card limits and balances.

Then, if your goal is to save money, I would also need to know the interest rates.

[Anonymous]

I want to reduce my monthly debt payments and keep my score up. Here are my details

AMEX personal loan 12.99% $13k bal $502/mo 3 yr

PenFed personal loan 12.99% $24k bal $568/mo 5 yr

NFCU Line of credit 13.99% $10k bal
$200 min pmt 10 yr payoff

NFCU Visa 15% $8k bal $200 min pmt 10 yr payoff

AMEX BCP 14% $6k bal $200 min pmt 5 yr payoff

Discover 5% $2k bal $60 min pmt account closed

The NFCU line of credit is treated like a credit card by the CRAs. My score will go up if I pay off the revolvers but I want to minimize my debt payments. I went on a major spree last year and hired a lawyer because I thought I wouldn’t be able to make the payments. But my taxes were lower than expected and I kept my gold coin collection.

[HeavenOhio]

What are your credit card and line of credit limits, and what were the original amounts on the loans? That information is necessary to determine what's best for your score.

From a scoring perspective, it's more helpful to pay down credit cards and lines of credit than loans. But you might gain a monthly payment advantage by working on the loans. Someone else would be in a better position than I am to answer that question.

In your case, the closed account with the balance is probably hurting your score more than anything. But then, that's also your lowest interest rate. It's up to you to decide whether your score or interest is more important.

[Anonymous]

Here are my credit limits and original loan amounts:

PenFed: $25k
Amex loan: $14,900
NFCU line of credit: $15k
NFCU Visa: $20,500 CL
Amex BCE: $15k
Discover: closed $2k bal original CL $9500

[Kforce]

I would pay-off the Discover if concerned about credit score.

I would pay off the highest interest and work my way down if trying to save money.

I would do the snow ball if I had low will power.

A good combo would be pay off the Discover and then work on the NFCU Visa and pay more than the minimum on all others.

[HeavenOhio]

Thanks for the added info. I think we have what we need to help you. Now it;s a matter of getting opinions from people with the appropriate knowledge.

No matter what you do, I don't think you need to worry about lowering your score. $15,000 in payments can only help. Most people come here wanting to improve their scores. In situations like that, dealing with revolving debt is almost universally more helpful than dealing with loan debt.

But your main objective is to lower your monthly payments. Interest doesn't seem to be a huge factor as it's all about the same except for the low-balance Discover account.

Because I'm no expert on loans, I can't tell you if you're better off putting the money toward the loans or the credit cards. It might be a mixture of both. If you don't know this already, I think the piece of knowledge your might want to acquire is what would happen if you pay ahead on your loans. Some loans require that you continue to make the same monthly payment while others will let you take a break from paying — or at least pay less — for a while.

If you can't get a break like that, you may be better off paying toward your cards. Or you might be better off paying toward your cards either way.

But as I said, I'm no expert, so don't rely too much on anything I say. I just want to remind people that this isn't the typical "I wanna improve my score" thread.

[Kree]

If my math is correct. Paying off the 3 year AMEX will lower your monthly payments more than anything else you can do. Followed by paying off the discover.

Generally loans will take payments off the backend, so it doesn't matter how much you pay, you will still have the same monthly payments, just a shorter loan.

Moving forward, you would then meet minimums and pay off one of the 5 year loans.  The 6k one if you want to see further decrease in monthly payments in the next year, or the 24k one if you want to see larger reductions in monthly payments around year 4  (this all depends upon how much additional payments you can make other than just the money freed up from your monthlies.)

[SouthJamaica]

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@Anonymouswrote:
I want to reduce my monthly debt payments and keep my score up. Here are my details

AMEX personal loan 12.99% $13k bal $502/mo 3 yr

PenFed personal loan 12.99% $24k bal $568/mo 5 yr

NFCU Line of credit 13.99% $10k bal
$200 min pmt 10 yr payoff

NFCU Visa 15% $8k bal $200 min pmt 10 yr payoff

AMEX BCP 14% $6k bal $200 min pmt 5 yr payoff

Discover 5% $2k bal $60 min pmt account closed

The NFCU line of credit is treated like a credit card by the CRAs. My score will go up if I pay off the revolvers but I want to minimize my debt payments. I went on a major spree last year and hired a lawyer because I thought I wouldn’t be able to make the payments. But my taxes were lower than expected and I kept my gold coin collection.

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Those are 2 inconsistent goals.

If your primary goal is improve your FICO credit score and your secondary goal is to reduce your monthly payments,

I would apply the $15k as follows:

Pay Discover down to zero.

Pay Amex BCP down to zero.

Pay NFCU down to $1k.

[Anonymous]

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@SouthJamaicaIf your primary goal is improve your FICO credit score and your secondary goal is to reduce your monthly payments,

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If anyone has this viewpoint above, I'd strongly urge them to consider flip-flopping those goals.  The only exception IMO would be if there was a mortgage application coming up relatively soon.