I think the interest rates on CC's would be much higher than those for installment loans and it would probably benefit you more to pay off the CC's first. That would also give you the extra contingency if you needed to use the cards for other expenses while you're working on paying down the loan.
That's my first instinct, unless someone else has a more reasonable response....lol.
Additionally, as an added thought.....depending on how many CC's your debt is spread across (and if any of those cards are maxed out), this would also help reduce individual utilization for "X" number of cards, which would help your overall FICO scores.
On Deck: No Plans Currently
@Cpmcmxc wrote:Hi Everyone,
I am in a unique situation and would really like some advice. I am going to be coming into some money roughly to the tune of around $30,000 after taxes. Now I am just trying to decide which would benefit me the most in the long run:
I have credit card debt sitting at around $25,000 which costs me roughly $1,300 in monthly payments alone to cover. Additionally, I have $30,057.00 of installment-based debt that costs me $1,388.89 to pay the minimum payment every month. Which would be the better one to pay off first? The end goal is to take out a debt consolidation loan to consolidate the rest into a more manageable payment, which would thereby alleviate a lot of my monthly expenses.
Current FICO 8s:
Equifax 657, Transunion: 657, Experian: 654
Any information or advice you can offer is greatly appreciated.
Best to pay off the credit cards first. That will boost your scores.
@SouthJamaica wrote:Best to pay off the credit cards first. That will boost your scores.
This ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ will give the fastest biggest boost in scores. FICO looks at installment debt expecting long term payments, and doesn't reduce your scores the same way it reduces scores for revolving debt.
13Oct22 Exp F8: 812
I guess I am missing the dilemma. If you can afford to pay down debt, assuming the debt is costing you more than you could make with investing that same money, you put the money toward paying down the highest APR debt, period. Forget the FICO boost.
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To give the best advice, one would need to know all the variables.
What is the nature of your cash flow?
You're currently paying about $2.7k a month in debt servicing. Presumably, this is after paying necessities like food and shelter. Is this sustainable, or is your income seasonal or in some other way at risk? Is your total credit card debt going down or are you just paying the minimums?
Is the loan secured or unsecured?
If the loan is secured against say a truck then the impact to your credit is probably negligible. The loan can be recouped by just seizing the truck. However, if that truck is required for your job then securing your livelihood might be a more important goal than minimizing your credit score.
Does the loan even allow prepay?
I had a student loan which did not and I paid a big chunk of money only to discover I didn't save a penny of interest and lost out on hundreds or even thousands of dollars of investment potential.
What are the interest rates?
If you have a 0% or low intro rate, it might save you money in the long run if you put the money in an interest bearing account for now and paying it off once the intro is over. Otherwise, generally you want to pay the highest interest first.
What is your credit card utilization?
AZEO is generally a good score hacking technique, but I think if the one card is at 90% then you're probably better off spreading it out over a few cards.
I know your stated goal was maximizing your credit score. I also recommend trying to keep enough cash on hand to cover 3-6 months of expenses. You might be able to do this while also significantly increasing your score.
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