Payoff Debt Order - Help Me!

[heyaim]

In what order would you pay these debts off?

#1 Card, 594.31 balance, 0.00%, 15.00 min. payment (will have to call to see how much longer the 0% is for)
#2 Card, 1,090.30 balance, 15.15%, 25.00 min. payment
Camper, 4,000.00 balance, 24.00%, 176.61 min. payment (this is to help rebuild credit)
Equity Loan, 45,000.00 balance, 5.25%, 200.00 min. payment
Mortgage, 80,000.00 balance, 5.5%, 714.89 min. payment (12 yrs left on loan)

I don't know if I should start with the camper, then the CCs or keep it in the order I have it. Then when I get to the equity loan and mortgage, I don't know which I should pay off first. The equity min. payment is interest only.

I transfer $25-$50/week to our savings EF account. There is $1450 in there now. Would you continue putting $$ in savings while snowballing the first 3 debts?

I've dedicated $250/mo to start snowballing these bills.

Any advise/tips welcome!! Thanks!

[disneysteve]

You bought a camper at 24% interest to "rebuild credit"? How much is the camper worth if you sell it today? If you can get close to what you owe, I'd sell it and be done with that payment immediately.

I'd stop adding to the EF for now. In fact, I'd take out $450 and put that toward debt and just leave $1,000 in the EF. That will give you $250mo. that you are already putting toward debt plus the $100-$200/mo. that was going to the EF plus that lump sum of $450 from the existing EF to throw at the debt.

How is your credit now? Might you be able to refi the mortgage and HEL? I recently got a 15-year loan at 3.99%.

Generally, I advise paying from highest interest rate to lowest interest rate so if you must keep the camper, work on that first. If you can get rid of the camper, then CC #2 would be first. You can just about pay that off in 1 month ($250 + $200 + $450).

Another suggestion would be to post your budget here for folks to make suggestions for places where you can trim spending and free up more money for debt repayment.

[maat55]

I would prioritize selling the camper and follow Steves advice.

[krantcents]

Originally Posted by heyaim

In what order would you pay these debts off?

#1 Card, 594.31 balance, 0.00%, 15.00 min. payment (will have to call to see how much longer the 0% is for)
#2 Card, 1,090.30 balance, 15.15%, 25.00 min. payment
Camper, 4,000.00 balance, 24.00%, 176.61 min. payment (this is to help rebuild credit)
Equity Loan, 45,000.00 balance, 5.25%, 200.00 min. payment
Mortgage, 80,000.00 balance, 5.5%, 714.89 min. payment (12 yrs left on loan)

I don't know if I should start with the camper, then the CCs or keep it in the order I have it. Then when I get to the equity loan and mortgage, I don't know which I should pay off first. The equity min. payment is interest only.

I transfer $25-$50/week to our savings EF account. There is $1450 in there now. Would you continue putting $$ in savings while snowballing the first 3 debts?

I've dedicated $250/mo to start snowballing these bills.

Any advise/tips welcome!! Thanks!

I agree with Steve and TJ, I am reluctant to suggest to borrow to pay off the higher interest loans, but that can be part of the solution. All this takes considerable discipline and organization. If you can increase your payment, perhaps postponing transfers to emergency fund for a few months or reduce it.

[tulog]

Take all your $1450 and immediately send it to pay down the camper, which is owning you at 24% interest. That $1450 will earn an immediate 24% return on investment, which is more important than any 'emergency use'. The emergency is you getting raped for 24% interest on a camper.

[bjl584]

Financing a camper is not the way to rebuild credit. But that aside, I would tackle this debt first. Depreciating asset and no write off tax advantage.

Next, tackle the credit cards. I would normally advise to tackle the highest interest rate card first, but in your case I would pay off that $500 balance card. Then go after the other one.

Then, start paying down the HELOC. I would guess that's a variable rate. It's going to go up probably in the next year or two. Pay it down as much as you can before that happens.

Last, pay down the mortgage.

Moving forward, find a CC with a reward program. Charge items on it, and pay off the balance in full every month. That is the way to rebuild your credit.

[packerfan]

Agree with everyone else. Pretty standard to pay the highest interest debt first.

[thomsoad]

Paying smallest to largest worked for me. So thats what I would advise. On a side note tho ... is your budget so tight that you can only squeeze $250 to pay off debt? If so I would recommend either tightening the belt or get a 2nd job. Thats just not much of a buffer between life and your EF.

[Tree0164]

I would keep the 1450 emergency fund.

1. sell the camper use the proceeds to get rid of the credit card debt
2. then focus on the home equity
3. Saving up 6-8 months of an emergency fund

[dczech09]

Take $450 out of savings and keep $1,000 in there as a starter emergency fund. Sell the camper and eliminate that huge interest rate debt. Attack CC#2 with everything you've got. After CC#2 is done, take out CC#1. Once you are credit card debt free, DO NOT charge anything unless you can payoff before the grace period is up (avoid CC interest at all costs).

I would work with a bank and see if there is anything you can do about refinancing the HEL and mortgage and combining under one account and one lien. If you can, great. If not, then pay the minimum on the mortgage and kill the HEL as quickly as possible.

[Bastille]

Contact your credit card companies. Ask each credit card company for help. They aren't likely to forgive you your loan, but they may be willing to reduce your interest rate. If your interest rate is currently 12% or more, ask if they would be willing to cut their rate in half.

[Eric80]

I would suggest maybe looking into debt consolidation or an IVA as they are both really good ways to organise yourself and your finance. They allow you to pre-plan which i have found is the essential part of paying back your debts.

[artwest]

The most effective way to pay off debt is by smallest balance to largest balance.

I would suggest that you stop funding your EF. That will free up $100-$200 per month to throw at your debt. Look into selling the camper. Tighten your budget (if you haven't all ready) and find a temporary 2nd job. You should be able to clean up the credit cards pretty quickly. By selling the camper, you should also be able to clean that up pretty quickly as well.

You may want to look into refinancing your house and add your Equity Loan in with it. In a few months you could be debt free except for the $125,000 mortgage on your house.

As someone else has mentioned, we could help you better if you did post your budget.

[crazyskunk82]

I'd agree with some of what everyone has said.

Keep the $1450 in savings for true emergencies. Try to budget for others like car repairs and such.

The fastest, and most rewarding way would be to take your $250 dedicated to debt repayment and pay the smallest debt first. Within 6 months, two of your debts would be gone. 8 months later, your camper would be paid off.

Also, see if you can dedicate more money to debt repayment. We didn't think we could, but we managed to find quite a bit hiding in gym memberships, cable, and just wasted money. We were able to knock out a lot more debt than we expected by making some cuts.