Distribution of Money for Debt

[Anonymous]

I have a question right now my score are:

EQ-688

TU-671

My debt is

Car Loan-      $13,400

Providian 1    $4393        (CL-$6000)       min pay. $135

Providian 2    $5000        (Cl -$6500)       min pay  $150

Discover        $1500        (CL-$2000)      min pay  $40 

Capitol One   $1500        (CL- $2000)     min pay  $50

Several student loans that are deffered for now.....

BK that falls off in 2010

Should I try and pay down the acct with highest balance or lowest balances first, or does it matter?

[MM1234]

When I was paying down I paid as much as I can on the one that had the Highest APR. The looks of it I would try to pay DOWN or OFF all the CCards. Then work on maybe sending in more on the car to pay it off sooner. But if the Payments are lower and auto loan APRs as usually lowwer, just use your avail funds for the CCards. Maybe others can help.

[Anonymous]

I like the snowball effect when paying down cc debts.   That is start with the lowest balance due, in your case either Dis. or Cap1. pay the extra money beyond min. payments until that is paid off ( all the while still making at least min. payments on all other cards )   and lets say for argument sake you were paying an extra $100 on you Dis. making it now $140 a month to Dis until it was paid off.   Then take that $140 and apply it the $50 you are paying Cap1 making it $190 a month until Cap 1 is paid off and then take the $190 and apply it to Prov 1 making it $325 a month until that is paid on and so forth.

I like that program for two reasons  1) you will see quicker results, which is more a mental achievement which can  lead to more of an incentive to keep it going and sort of makes it addicting.  2.)  It's eaier to come up with money in your budget to begin paying off the smaller one and by the time you get to your higher balances you will have a good size snowball already built up to start paying it down.

What ever works for you, this worked for me.

[Anonymous]

Thanks you guys, actually I am going to try and get a loan from credit union to see if I can get a better rate for both of the Providians. To pay them off quicker and faster. Will let you know how it goes.

[Anonymous]

Hey if that works for you than go for it.   I personally don't think it makes alot of sense to take on more debt to pay down debt because at the end of the day the debt is still there, just transferred from one hand to the other, albeit with possibly a better interest rate, but still the same debt none the less. 

[Anonymous]

Mainly because at this point I amjust really in pay off mode. My interest rates are high on Providians because I did balance transfers, so the sooner I can get a lower rate the better.Would you suggest keeping the high rates and not usng the credit union's lower rate to pay off?

[Anonymous]

Diamond,

Opinions vary. Here's mine.

If you can get a lower rate loan from the CU to pay down some of the CCs, do it.

1) Use the CU money to bang down the balance on the CC with the highest APR. Take it down to maybe 40% util. Once they've cashed the check, give 'em a call and ask about getting an APR reduction and a CLI. Tell 'em you're trying to pay down some debt, this is your highest interest card, and you're hoping they can help you out.

2) If they say yes, then you get a lower APR and another card becomes your highest APR card. Repeat Step 1 for your new high APR card.

3) If they say no, then pay the card down to 10% util. Once they cash that check. Call 'em and ask again about an APR reduction and a CLI. If they say yes, then you get a lower APR and another card becomes your highest APR card. Repeat Step 1 for your new high APR card.

4) If they say no, the pay the card down to $0 and stick it in your sock drawer.

You are using a perfectly legal threat--the threat of no longer paying the CC company interest on a balance. They can choose to collect a lower interest on some money or a higher interest rate on $0. Most CC companies will get the math.

[Anonymous]

You do what you are most comfortable with.   I'm not saying taking out a loan is a horrible idea.    After you pay off your two cards I would not use those cards at all.   You don't want to fall into the trap of thinking " Ok well my two cards have 0 balance so I can charge this and that".   because even though techincally they have a zero balance in essence they don't because you are paying off the loan that brought them down to zero.   And if you start incurring charges on those cards again you are defeating the purpose of taking out the loan in the first place and will not only still being paying off your loan but paying down charges on the cards you just paid down  getting you basically nowhere. and even more in debt.

So if you discipline yourself taking out the loan isn't a totally bad idea.

[MM1234]

I agree that taking out a Loan is not the best thing but only you know your situation and if you feel its best then I can agree to that too. This way if the APR on the Credt Union is much lower you can do a ONE time loan and pay off ALL your Cards then CUT THEM UP - DONT CLOSE THE ACCOUNT THO - then you can focus on only ONE payment which is the Credit Union one.

[Anonymous]

Taking out the loan with the credit union was an idea I had because I want to but a home in about 6 months. I want to get this debt paid off and I DON'T want to charge them up again. I have come to realize this cycle of debt and I am tired of having it. I understand it will be of no use to me if I use the credit union to consolidate only to charge those cards back up. That is not what I want to do. In fact I have taken all my cards out of purse except my debit to force myself to use cash. If I have to come all the way home to get a cc then I have time to think about if the purchase is really worth it.

Thanks for the suggestions everyone. I guess what I have learned from all this is the best way to get a good FICO score and keep one is to keep debt down and pay on time. I always pay on time but I gotta keep my debt down. I am not sure if the CU has even approved the loan but either way I am still sending triple payments to my cc's to pay off one way or another.