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financially wrecked - please advise my best moves

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Anonymalous
Valued Contributor

Re: financially wrecked - please advise my best moves

The auto loan is 2.5%. Paying it off before your credit card debt wouldn't save you money.

Message 11 of 66
SouthJamaica
Mega Contributor

Re: financially wrecked - please advise my best moves


@iowe wrote:

Thank you for your time drawing that gameplan up. Smiley HappyThat's basically what I was considering. My objective is to get the hell out of the debt moreso than get into a mortgage, the mortgage is just my secondary objective. I'm just trying to accomplish this as smartly as I can with the options I have. With my relatively low income, I have to be debt free essentially to get approved and realistically afford a decent home and still be able to purchase essential things.  

Just for the sake of knowing, say I opt not to get the Penfed loan and go at it all with snowballing from the ground up. Would you start with the lowest balance card first, or would you start by paying the auto loan off first and then go after the cards? 


Until a few minutes ago, I would have said just go after the revolving accounts first, because paying off the installment loan probably won't help your scores but paying down revolving accounts would.  But after reading @MarkintheHV 's post I think he has a very valid point: getting rid of the car loan makes the largest amount available monthly with which to tackle the others.  So now I'm leaning towards @MarkintheHV 's advice.


Total revolving limits 650200 (530700 reporting) FICO 8: EQ 708 TU 714 EX 715

Message 12 of 66
DONZI
Established Contributor

Re: financially wrecked - please advise my best moves


@iowe wrote:

 

Installment loan (auto loan) :  payoff $6610.01 -  monthly payment $510.53   2.5% interest rate

Installment loan (student loans) :  29k - monthly payment is currently in forbearance not gaining interest 

 

NFCU Cash Rewards apr 10.25%   $ 20,841 / 24000 limit  $421 min payment 

Discover apr 18.25%                         $    9756 / 18,000 limit  $ 298 min payment

Snyc/Amazon Prime  apr 22%         $   3634  / 6000 limit   $118 min payment

Pentagon FCU   apr  19%                  $    3022 / 10000 limit  $60 min payment 

Capital One QS apr 22.90%               $    2932 / 4000 limit    $87 min payment 

Of those listed, your two highest revolving CL are also the best rates.. NFCU has no balance xfer fee..

Maybe you can get a CLI on the NFCU card for more consolidation space?

Perhaps also see if any card APR can be reduced.. Could be a couple hours on the phone can change the lay of the land.

 

If nothing productive on the phone, Cap1 to NFCU and the Disco has room for Sync and PenFed to start. Zeroing the 3 highest APR cards within your existing credit will simplify bookkeeping in any event and save some money moving forward.

 

Revolving debt total ~ 40k   Monthly min payment total ~ $960 

I have about an extra $600 per month to snowball with, on top of my minimum payments that I've been throwing at my lower balance cards. I've knocked out two of them so far.

Total debt including Installment & revolving ~ 70k 

 

Only soft pulls but I checked my rates for a personal loans from two lenders to consolidate some revolvers.

Penfed preapproved for 11.25% on 20000   

Discover Personal Loan  prequalified for 18.99%  on 30000

The penfed loan looks tempting, but if you can negotiate a CLI for NFCU and use that for consolidation it's better than either of the loans -- which you may or may not get approval for, and if so, may end up with different amounts or APR.

 

Any cashback or points you may have consider using against balances and lock/freeze as you see fit.

2014 credit2020 credit2021 credit2023 credit
paypal credit imagecredit card imagecredit card imagecredit card imagecredit card imagecharge card imagecredit card imagecredit card imagecharge card imagecharge card image
[2020-12-09]=[EQ8|786]-[TU8|746]-[EX8|772] .... gardening until I can't (again).
[2023-10-01]=[EQ8|797]-[TU8|776]-[EX8|775]
Message 13 of 66
Anonymalous
Valued Contributor

Re: financially wrecked - please advise my best moves


@SouthJamaica wrote:

@iowe wrote:

Thank you for your time drawing that gameplan up. Smiley HappyThat's basically what I was considering. My objective is to get the hell out of the debt moreso than get into a mortgage, the mortgage is just my secondary objective. I'm just trying to accomplish this as smartly as I can with the options I have. With my relatively low income, I have to be debt free essentially to get approved and realistically afford a decent home and still be able to purchase essential things.  

Just for the sake of knowing, say I opt not to get the Penfed loan and go at it all with snowballing from the ground up. Would you start with the lowest balance card first, or would you start by paying the auto loan off first and then go after the cards? 


Until a few minutes ago, I would have said just go after the revolving accounts first, because paying off the installment loan probably won't help your scores but paying down revolving accounts would.  But after reading @MarkintheHV 's post I think he has a very valid point: getting rid of the car loan makes the largest amount available monthly with which to tackle the others.  So now I'm leaning towards @MarkintheHV 's advice.


That doesn't make sense, though. Using the $600 extra/month to pay off the auto loan just means paying off the low interest auto loan first, while continuing to pay the interest on the balance of the high interest credit cards. You're not freeing up ~$500/month, you're spending an extra $600/month on a low interest rate loan while you could be paying off a high interest rate loan instead. Yes, after about 6 months the car will be paid off entirely and you can use that money for other things, but the same would be true if you paid off a high interest loan first. The only reason to pay off the auto loan first is psychological, not financial.

Message 14 of 66
Credit_Master
Regular Contributor

Re: financially wrecked - please advise my best moves

I would suggest if you have the will power to not charge up the cards use the avalanche method to attack the highest interest card first and then go from there. I am in agreement with the others who advise to let the auto loan ride itself out. 

 

On another note, I have been through a divorce and was blessed to get custody of my daughter without a fight. I don't have the words to express how it makes me feel to see a father fight for a relationship with his daughter. When she gets of age to understand what you did and the time you have spent in her life it will build a bond that is unbreakable. Enjoy ever minute of the time you spend with her while she is young because they grow up so fast. My daughter is a junior in college and still lives with me and I wouldn't have it any other way!

 

Credit_Master

Current Cards

Goal Cards

Closed Cards

Total CL $84,850
Message 15 of 66
SlideOrInsert
Regular Contributor

Re: financially wrecked - please advise my best moves

given the avalanche method, focusing on starting with the auto vs credit cards is rather trivial. its a math problem to determine the difference in cumulative interest. I suggested starting the auto first because OP mentioned modifying their insurance and freeing up another $80/mo.


the OP mentioned the possiblity of personal loan. refinancing high interest debt to much lower interest will save OP thousands of dollars over the long term.


at the end of 2018, with a blended interest rate of 18% I was at 30k revolving debt of 36k available. my score was in the low 700s with no derogatories. I acquired a personal loan at about 11% for 36 months. I spent 2019 making over the required payments on the loan. during those 12 months I was able to grow the credit limits on all my cards. in the beginning of 2020 I was able to take advantage of a 0% promo on one my cards and payoff the loan by moving the remaining balance. total interest and fees paid was about $2300 on paying off 30k! if I had gone with the avalanche/snowball method I easily would have paid 2-3x that in interest.


I took the "finances > fico" approach. in any case, paying thouands a month with no tangible return is a grind. what @Anonymalous said about a plan and frugality is critial.

 

upgrade
9/2022
$30000
nfcu
8/2020
$20000
nfcu
12/2018
$30000
bofa
8/2016
$30000
citi
3/2016
$21000
discover
5/2014
$20000
chase
10/2007
$8900
Message 16 of 66
disdreamin
Valued Contributor

Re: financially wrecked - please advise my best moves


@SlideOrInsert wrote:

given the avalanche method, focusing on starting with the auto vs credit cards is rather trivial. its a math problem, the difference in cumulative interest is in the tens of dollars. I only suggested starting the auto first because OP mentioned modifying their insurance and freeing up another $80/mo.


I am wondering about that insurance savings. If it means dropping full coverage, I would avoid doing that at all costs (including $80 per month) because if something were to happen to the now-paid-for vehicle that wasn't covered by someone elses insurance, that could be a nightmare. OP, could you clarify if the savings would be due to lowering coverage limits or to dropping collision and comp.

 

If the savings mentioned above are from dropping some coverage entirely, I'd go a different route and keep the auto loan since it's low interest and focus on the higher interest debt first. But then, I tend to be quite risk-averse, so...

Message 17 of 66
iowe
Regular Contributor

Re: financially wrecked - please advise my best moves

I plan on leaving my coverage as is for the time being, unless for some reason I need to pinch a few dollars from other places and take the risk. I'm not sure how I would adjust my coverage in that event, but I'll stay mindful of your point there. Thanks!  









2024 Goal: To finally be debt free
Message 18 of 66
disdreamin
Valued Contributor

Re: financially wrecked - please advise my best moves


@iowe wrote:

I plan on leaving my coverage as is for the time being, unless for some reason I need to pinch a few dollars from other places and take the risk. I'm not sure how I would adjust my coverage in that event, but I'll stay mindful of your point there. Thanks!  


Just using ball-park figures since I don't know the details, but if you took out a 30k auto loan for 6 years and have ~$6500 left, that would mean you've probably got a used vehicle worth well over $20k in this market. No way would I risk a total loss of $20k+ for minimal savings of <$1k per year. I'd be more inclined to raise the heck out of my deductible or look for savings elsewhere rather than gamble my sole means of transportation.

 

Good luck OP, hope you're able to get those debts knocked down! Even an additional temporary income source might be worth considering, if your primary employment and family situation allow for it.

Message 19 of 66
iowe
Regular Contributor

Re: financially wrecked - please advise my best moves

I think I'm going to follow the strategy you laid out. If after paying off the Discover card 6-7 months from now and having the only things remaining being the Penfed Consolidation Loan and the NFCU Card, I will wait for another zero APR for 18 months offer from Discover since I occassionally get those, and then relieve that NFCU card of a large percentage of that balance. Then pay the Discover card off (well before the zero% APR period ends of course) again while continuing paying the new lower minimum on the NFCU card. I will repeat this process until the NFCU card is paid off.   

 

Does this sound like a good plan?   

 

 









2024 Goal: To finally be debt free
Message 20 of 66
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