Lowering Debt (right sequence)?

[m3rge]

Hi everyone,

I'm in a aggressive plan to bring down my debt and I need some feedback to see if I'm maximizing the money I'm spending in order to lower it.

My debt:

CC 7200/14000 149 this month (vary by month)
Loan 1400/11000 term 72 int 13.99 226 monthly payment.

I been focusing in getting the loan down and hopefully bringing it to zero within the next month or beginning of September, also all payments aside the regular monthly payment is being done to the principal. The payoff balance as of right now is around 30.00 difference. I think having the 226 in my pocket would help greatly paying off the Credit Card. I been making payments to the CC but not as consistantly as the loan, that's why there is a difference between one and another.

My payments for both are around either 600 for just one debt or 300 for both. I haven't use the CC in the last couple months.

Beside having as less debt as possible I want also to apply for Jetblue Card Plus before Christmas because I want to spend Christmas out of Country and I have points already with Jetblue.

How do you guys think I'm doing and how realistic is to apply for the card before Christmas even lowering more my debt 1k or 2k and having my loan paid off before applying?

My TU: 771, 0 inquiries 0 missed payments.

[Anonymous]

If you have even one credit card with a higher interest rate than your loan (likely) then focusing most of your extra money on the loan will delay the date at which all debt is paid off.

The fastest way to pay off debt is always to pay off highest interest debt first.  The only exception is if you think the emotional high caused by paying off the loan will give you some extra will power to pay down debt even faster.  From the point of view of the math, however, paying down high interest debt first is the winning move.

Also be aware that your plan to pay off the loan entirely will cause your score to drop by about 30 points.  If you are fine with that, then you can ignore that as a drawback.

[m3rge]

Thank you for your response. I realigned my strategy based on your feedback. How positive/negative would be to apply for Jetblue Card Plus with the loan or without it?

[tcbofade]

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@m3rge wrote:
Thank you for your response. I realigned my strategy based on your feedback. How positive/negative would be to apply for Jetblue Card Plus with the loan or without it?

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Apply for the new card BEFORE you pay off the loan.

[xaximus]

I would leave the loan as is for now (keep paying the minimum monthly, but do not payoff). Attack your CC debt full on, bring that down as much as you can. Ideally you want it under 28.9% (4046) or 8.9% (1246). Currently, you're at 51.4%, so just bringing it down to 48.9% will make a difference.

Ideally, I would have paid the CC first and let the loan run its course but in hindsight, you're paying debt off so nothing wrong with that.

Jetblue Card Plus - Bring down your debt to atleast to 28.9% (3k difference between your current 7200 (minus the 149 payment) and 4046 (28.9% of 14k). I would apply then. Just make sure you have your loan open. It may be possible to push the date out for the loan (I would call in and see if any extensions are available).

[Anonymous]

I hope Xaximus and I are being clear.  Make the required monthly payment on the loan, but do not funnel any additional money toward that paying that loan down.  All the money that you have spent thus far toward paying down the loan was misspent -- it should have been used for paying down your CC debt.  Not your fault -- you just didn't know.

All extra future money should be spent toward the goal of paying off your CC debt. 

[xaximus]

OP - with the loan being relatively low at this point - reach out to the lender to see if they can suspend or put that loan on hold. They usually have some options regarding that. Once you pay that off and there are no other loans, that will negatively affect you. To curb that, your best bet is to put a hold on that loan so that no payment is do for an x amount of time (if lender has that option), or open a SSL so that you have a loan showing.

Good luck!

[Medic981]

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@Anonymous wrote:

I hope Xaximus and I are being clear.  Make the required monthly payment on the loan, but do not funnel any additional money toward that paying that loan down.  All the money that you have spent thus far toward paying down the loan was misspent -- it should have been used for paying down your CC debt.  Not your fault -- you just didn't know.

All extra future money should be spent toward the goal of paying off your CC debt. 

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Pay your loans minimum payment. Except for your highest APR credit card, pay minimum + $5 on each of your CCs. For your highest APR CC pay as much as you can each month until it is paid off. Then continue paying as much as you can on your next highest APR CC and so on until your CCs are paid off.

[m3rge]

When you mention the term "emotional high" what exactly you referring to?

Do lenders see people with installment loans in a good way? Even if you want to apply for a CC?