What would you do?

[NateW1269]

I have a loan with NFCU that is almost paid in full. It costs me $250 per month. Once that $250 is freed up I will use it to pay down other debt. The question is which scenario makes better $ense. Here's what I'm looking at. Mind you UTL is at 90% for all. 

Scenario 1

Pay down a $20k card (14.4APR) then balance transfer 3 cc's (all with 21APR) over to that card

Note: The balance on the 3 other ccs total $20k

Scenario 2

Pay down the other 3 cards using the snowball affect and pay min on the $20K (14.4APR)

[brk1971]

Is an extra $250 all you can afford (as far as debt reduction is concerned)? I'm not asking to be critical, but rather thinking that $40k in CC debt, all above 14.9% is likely costing more than $250/ month in interest. And a 90% utilization is likely hurting your score pretty significantly. 

With option 1, I'd be concerned about balance chasing or no balance transfer offer being available when I got to that point  

Option 2 seems cheaper in the long run

But if you can create an option 3, even at a higher APR, of an installment loan to move enough of that to reduce your utilization down, you may start to see low APR offers that could save you significantly. 

[coldfusion]

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Let's make sure we have this straight.

You have an existing loan that you are paying $250/month that is almost paid off.

You have 1 card with a $20K CL currently at 90% utilization @ 14.4% APR.

You have 3 other cards with a combined outstanding balance of $20K @ 21 APR.

You have about $18K available right now that you can use to pay down debt.

You are about to have $250/month as of yet not slotted for any use that moving forward you want to apply toward these balances.

How much are you currently paying per month against each of these 4 cards?

There is a risk in your 1st option in that it is predicated on you not being balance-chased if you pay off that $20K card.

[NateW1269]

@coldfusion Nope there is no $18k available. This debt is $40k total. What I was asking is which format to use to start paying down the $40k.

[NateW1269]

@brk1971 Unfortunately an extra $250 is all that I can throw at the debt right now. I do see your point in scenario 1 regarding the chase and wonder if NFCU has done this to its customers. The $20k card is also with NFCU and is 14.4%.

Not so sure about how your option 3 helps? Would you elaborate a bit more thanks?

[brk1971]

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@NateW1269 wrote:

Unfortunately an extra $250 is all that I can throw at the debt right now. I do see your point in scenario 1 regarding the chase and wonder if NFCU has done this to its customers. The $20k card is also with NFCU and is 14.4%.

Not so sure about how your option 3 helps? Would you elaborate a bit more thanks?

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Spitballing here, as we don't know anything about your profile other than you're showing 4 cards as maxed out, which is taking a huge toll on your scores:

Step 1 - take out personal debt consolidation loan (or cash out mortgage or cash out auto loan) for as much as you can reasonably afford and get approved for 

Step 2 - use proceeds from loan to pay down credit card balances (reducing utilization, which represents a substantial portion of your credit score)

Step 3 - when utilization reports as improved, check for balance transfer promo offers on existing cards and new card offers with balance transfers 

Step 4 - transfer what you can (without exceeding 89% utilization on any one card) from the highest APR balance (including the loan) to the promo APR card

Essentially, right now you are adding more in interest per month than the $250 you mentioned, so I'm assuming you're making other payments to those cards. If we assume that, aside from the $250 you mentioned, you are already paying at least the interest added to each card each month (then adding the $250 on top of that) you'll have your credit cards paid off in just over 13 years. But if you can reduce the portion of your total payments that is going towards interest that continues to accrue, more of each payment (aside from the $250) is going to the principle balance. 

Truly the largest issue here is that you need to increase your ability to pay more toward that debt. (Not harping, just indicating that you're in a pretty deep hole and moving debt around to reduce APR only impacts it so much.)

[disdreamin]

In the case described here, the more gratifying thing to do coincides with the financially responsible thing to do, thankfully (giving side-eye to Dave Ramsey). I'd hit the debt with the highest interest rate first and move forward from there, snowballing as I went. If two interest rates are close, I'd get them both under the 90% threshold and then work on the smaller debt. While I know it doesn't matter mathematically, I'm someone who likes checking things off lists. Being able to do that with credit card, having brought it to a zero balance, would be motivating for me. By the time you are ready to tackle the largest debt with the lowest interest rate, you'll have a big snowball rolling and should be able to make a nice dent quickly.

[SouthJamaica]

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@NateW1269 wrote:

I have a loan with NFCU that is almost paid in full. It costs me $250 per month. Once that $250 is freed up I will use it to pay down other debt. The question is which scenario makes better $ense. Here's what I'm looking at. Mind you UTL is at 90% for all. 

Scenario 1

Pay down a $20k card (14.4APR) then balance transfer 3 cc's (all with 21APR) over to that card

Note: The balance on the 3 other ccs total $20k

Scenario 2

Pay down the other 3 cards using the snowball affect and pay min on the $20K (14.4APR)

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In order to answer your question I would need to know

1. whether there would be a balance transfer fee in scenario 1, and if so how much

2. what your primary objective is: paying the least interest, getting out of debt the fastest, improving your credit scores (and if so which scores)

3. the balances on the other 3 cards

[disdreamin]

Since the original thread was over 5 months old, I'm hoping OP will pop in and update on what they chose to do. I agree with others who expressed concerns about balance chasing with that amount of CC debt, and going at the larger interest rate balances first and working toward the lower interest rate by snowballing. Hopefully OP has made some progress!