What to do first? Debt vs Savings/Retirement

[Anonymous]

So you suggest paying off the car and keeping it vs. selling or trading it in for something cheaper?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Here is an update to the debt situation:

Credit cards: $7K @ 24% (These have been paid)
Car: $30K ($820 payment monthly w/48 months remaining)
Car: $17K ($492 payment monthly w/48 months remaining)
DH's CC consolidation loan: $11K @ 5% interest (He just got this a few months ago)

This loan couldn't have helped his credit score.

I think you have a good and realistic attitude, OP! It must feel good to have those cc's paid off. Now set aside, $1k for emergency and put any other cash you have directly toward that consolidation loan. Then you can sit down with DH and work on how to get through or sell the cars.

Bad choice.

The next debt she needs to take care of is the $30K car loan. That is at 11% interest. The second car ($17K) is at 7%. The consolidation loan is at 5%.

In a situation this bad, I don't agree with the Dave Ramsey theory that you pay the smallest balances first. You have to go with the financially more sound policy to pay off the highest interest loans first. The feel-good effect of paying off loans has been achieved by paying off the 24% CC debt. Now, go for the path that gets them out of debt fastest and that is paying down the loan that will cost them the most money if they leave it outstanding.

They are paying more than twice the interest rate on the first car than the consolidation loan. Based on her $820 monthly payment, she'll be paying $9360 in interest over the next 4 years on that car ($2340/year). She's paying $6616 in interest on the second car ($1654/year). It's harder with the consolidation loan. We only have the rate and not the APR, but they are paying about $550-600 in interest per year. Paying off the high interest rate first car loan will save them over $1000 in the first year alone vs paying off the consolidation loan. That's just throwing more money away.

So you suggest paying off the car and keeping it vs. selling or trading it in for something cheaper?

[Anonymous]

Anonymous wrote:I would re-evaluate my life choices. How on earth do you owe $30k on a car?

THIS!! OP needs to Live Within Own Means.
Spend less than the amount you bring in. Otherwise, it does not matter what to payoff first.. you will alway be in debt way over your head.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Here is an update to the debt situation:

Credit cards: $7K @ 24% (These have been paid)
Car: $30K ($820 payment monthly w/48 months remaining)
Car: $17K ($492 payment monthly w/48 months remaining)
DH's CC consolidation loan: $11K @ 5% interest (He just got this a few months ago)

This loan couldn't have helped his credit score.

I think you have a good and realistic attitude, OP! It must feel good to have those cc's paid off. Now set aside, $1k for emergency and put any other cash you have directly toward that consolidation loan. Then you can sit down with DH and work on how to get through or sell the cars.

Bad choice.

The next debt she needs to take care of is the $30K car loan. That is at 11% interest. The second car ($17K) is at 7%. The consolidation loan is at 5%.

In a situation this bad, I don't agree with the Dave Ramsey theory that you pay the smallest balances first. You have to go with the financially more sound policy to pay off the highest interest loans first. The feel-good effect of paying off loans has been achieved by paying off the 24% CC debt. Now, go for the path that gets them out of debt fastest and that is paying down the loan that will cost them the most money if they leave it outstanding.

They are paying more than twice the interest rate on the first car than the consolidation loan. Based on her $820 monthly payment, she'll be paying $9360 in interest over the next 4 years on that car ($2340/year). She's paying $6616 in interest on the second car ($1654/year). It's harder with the consolidation loan. We only have the rate and not the APR, but they are paying about $550-600 in interest per year. Paying off the high interest rate first car loan will save them over $1000 in the first year alone vs paying off the consolidation loan. That's just throwing more money away.

So you suggest paying off the car and keeping it vs. selling or trading it in for something cheaper?

Personally, I would sell the expensive car, get a cheaper one with good gas mileage. But getting rid of the car is not as critical as getting rid of the car payment. She needs to pay off the $30K @ 11% car loan ASAP. If she cannot pay it off within the next year, then she needs to sell it and put the rest of the $15-20K that she didn't spend on paying off the 24% CC towards paying the difference between the value of the car and the balance of the loan. $30K @ 11% is just a ton of interest to be paying ($2340 per year in interest alone).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Here is an update to the debt situation:

Credit cards: $7K @ 24% (These have been paid)
Car: $30K ($820 payment monthly w/48 months remaining)
Car: $17K ($492 payment monthly w/48 months remaining)
DH's CC consolidation loan: $11K @ 5% interest (He just got this a few months ago)

This loan couldn't have helped his credit score.

I think you have a good and realistic attitude, OP! It must feel good to have those cc's paid off. Now set aside, $1k for emergency and put any other cash you have directly toward that consolidation loan. Then you can sit down with DH and work on how to get through or sell the cars.

Bad choice.

The next debt she needs to take care of is the $30K car loan. That is at 11% interest. The second car ($17K) is at 7%. The consolidation loan is at 5%.

In a situation this bad, I don't agree with the Dave Ramsey theory that you pay the smallest balances first. You have to go with the financially more sound policy to pay off the highest interest loans first. The feel-good effect of paying off loans has been achieved by paying off the 24% CC debt. Now, go for the path that gets them out of debt fastest and that is paying down the loan that will cost them the most money if they leave it outstanding.

They are paying more than twice the interest rate on the first car than the consolidation loan. Based on her $820 monthly payment, she'll be paying $9360 in interest over the next 4 years on that car ($2340/year). She's paying $6616 in interest on the second car ($1654/year). It's harder with the consolidation loan. We only have the rate and not the APR, but they are paying about $550-600 in interest per year. Paying off the high interest rate first car loan will save them over $1000 in the first year alone vs paying off the consolidation loan. That's just throwing more money away.

So you suggest paying off the car and keeping it vs. selling or trading it in for something cheaper?

Personally, I would sell the expensive car, get a cheaper one with good gas mileage. But getting rid of the car is not as critical as getting rid of the car payment. She needs to pay off the $30K @ 11% car loan ASAP. If she cannot pay it off within the next year, then she needs to sell it and put the rest of the $15-20K that she didn't spend on paying off the 24% CC towards paying the difference between the value of the car and the balance of the loan. $30K @ 11% is just a ton of interest to be paying ($2340 per year in interest alone).

+1. But OP, I think the single biggest thing you need to do is get a handle on where the rest of your income is going. A $30K car loan at 11% isn't the wisest move, but you could pay it at your income if you wanted to based on your other fixed expenses. The question is what you're doing with that money instead right now. Go through your credit card statements line by line and catalog EVERYTHING. Then step back and figure out the patterns.

[Anonymous]

Would love an update.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ugly picture...

1. Pay off CC
2. Save remains bonus as emergency fund
3. Re-examine your spending
4. Pay off other debts/save

How can a late 30/early 40 couple be this irresponsible?

Ugly post by you.

Thank you. That's exactly why I didn't respond to it.

But not inaccurate.

[Anonymous]

Wow... You never learned how to manage money?