Paying off Debts

[flash]

[quote=rexdart]in all seriousness Lisa, another important question to consider is whether you are looking to manage this debt or eliminate it.

it would seem a self evident question but I realize many people do not hold the aversion to debt that I do.

[quote]
EXCELLENT point!

A little update:

I transferred my balance from credit card A which was at 17.740% to a card that has no interest until Sept. 2007. However, I had to add a class for school to it, so that added another $500. Anyways, here is my new status:

1. Credit Card A: $0, 17.740% APR
2. Unsubsidized Loan: $2676.35 due, 4.700%
3. Credit Card B: $512.05 due, 0% APR until Feb. 2007
4. Credit Card C: $1500.00 due, 0%APR until Sep. 2007
5. Subsidized Loans: $10273.55 due, 0% interest until I graduate (5/2008)


I feel the order should be as I have put it. I think I should now work on either A, my student loan, or B, Credit card B next. Oh... I might add...

Credit Card B: after Feb. 2007, the interest rate will be 11.74% (though it's not fixed, so that could change)
Credit Card C: after Sep. 2007, the interest rate will be 8.99% fixed

Anyways, I am looking to eliminate this debt so I can start saving money up for the future. I'm working as much as I possibly can while in school, so hopefully it's possible.

[debtfreesteve]

Lisa, here's a quote from Candice Watters,

Stop Digging. You'll never get out of the hole you're in if you're still making it deeper. You have to stop taking on student loans (and any other debt). If you still have unpaid semesters to go, take a break from your studies to earn enough money to pay for what remains. Pay-as-you-go from here out.

This may seem radical, however you are never going to get out of this mess, if you keep charging.... adding onto the debt. It's like treading water. I understand I'm not telling you anything you don't already know...

Getting out of this debt is like losing weight, you have to get that first 5 pounds during those 1st two weeks to get PUMPED!

Knock out the smallest one, then tackle C and then # 2. I know what I'm talking about, we've paid off $111,000 worth of debts, in a little over 2.5 years, and we didn't get anywhere when we started paying off the highest interest rate ones.... you don't get that first WIN, to really get you motivated to clear the rest...

[Ima saver]

Listen to debtfreesteve, he knows what he is doing!!! Yeah, Steve!!

[Trillian]

I would say student loans are an exception to the general rule-- earning power grows when you finish, after all!

Try to see if your employer can do any matching towards education, or find one that can if its feasible,

Try to find grants and scholarships to WHATEVER amount, however small, as these do not need repaid.

Try to find paid internships in the field of your degree, as those can lead to paid job opportunities that value your degree and experience both.

Try ALL possible ways to NOT add to debt and to Pay down.

I wouldnt say drop out of school -- those debts can come due sooner!
Education is a good goal to stick with.
But look at ALL your options and which ones make sense for YOU.

[story3girl]

I agree with what Trillian said - apply for ANY grants and scholarships you can find. Most people do that before they start school, but then stop once they're in school. There are plenty of scholarships for juniors and seniors.

Also, are you taking summer classes to get you out of college sooner? If you can get college down to 3 or 3.5 years that's a HUGE savings in how much student debt you have to take on, and it's that much sooner that you can start earning a bigger income.

Kudos to you on trying to pay these off now! As for your original question, if I were you, the FIRST item on my list would be saving for the fees and books for fall semester so you can stop charging them. Then I would pay the interest only on the unsubsidized loan, nothing on the subsidized loan, and pay off the credit cards B first and then C, and then if you're still making headway (which, with your energy, you may be) start on the unsubsidized loan. Since there are no minimum or required payments on the student loan you'll have to keep on top of yourself to keep up with the interest. Are these direct loans? If so, do you know you can monitor them online?

Good luck! And thank you, you inspire me!

Yes, I get grants every year. I have some for this fall too, or I'd need to borrow more than I am in loans. Tuition gets partially covered with the grants, but not all of it. I have to pay the difference, plus textbooks and other fees and such. I have applied for scholarships every semester as well, but haven't gotten any yet. Yes, the reason I'm taking the summer classes is to finish sooner. If I don't take any, then I'll be in college an extra semester. I'd rather just finish so I can start making the big bucks, lol... and pay it all off quicker. Other than school, I do not use my credit cards at all anymore. I actually don't buy anything except gasoline, and believe me, I've read about a zillion tips on saving on gas, and implement them as much as possible. I use mypoints.com (I don't buy anything on there, I just click the ads that I get in email for points) to get $10 walmart giftcards. I use those if I need anything that's not gas or school-related. And I don't buy clothes, shoes, entertainment things, or snacks. I live with my future in-laws (to save on rent/utilities) and they insist on buying food, so to help them out, I always wash dishes and clean around the house. I also keep practically everything unplugged in my room and help save on their utilities as much as possible. In fact, as soon as I finish this post, I'll be turning off and unplugging my comp. I'm doing my very best to get out of debt. I work about 25 hours a week waitressing, but I'm in the process of finding a better tipping location (but i'm not quitting until I get hired), and I help my fiance with his videography business and make good money off of that. I'm using all of this to pay down my debt and keep from putting anything else on credit cards. Thanks for the advice everyone!

[Ima saver]

Sounds like you are doing pretty well!!

[cbmeeks]

This may have already been answered but here is my take.

Originally Posted by lisasayzhi

I am thinking I should tackle them in that order, but should I just pay solely on one debt until it is payed before moving to the next, or should I pay a little on each one that is accruing interest?

Thank you for the help!

Do what Dave Ramsey says. Lowest first and minimums on the rest. When the lowest is paid off, take that extra money and apply it to the next lowest. The only time you would take a higher amount before a lower amount is if the loans are close in size and it has a higher interest rate.

If you try extra payments on all of them at the same time, you will see slower progress and get discouraged. Tackling the smallest ones first gives you that little "victory dance" attitude and encourages you to work harder. It's working for us.

For example, for me:

1) van: $13,xxx at 21.23%
2) car: $11,xxx at 17%

I am going after the van first because it's less than $2000 difference but much higher interest. Plus, the car is a 2006 while the van is a 2001. So the van is loosing value MUCH MUCH faster.

So, in your situation,

Originally Posted by lisasayzhi

1. Credit Card A: $1104.18 due, 17.740% APR
2. Unsubsidized Loan: $2676.35 due, 4.700%
3. Credit Card B: $685.86 due, 0% APR until Feb. 2007
4. Subsidized Loans: $10273.55 due, 0% interest until I graduate (5/2008)

I am thinking I should tackle them in that order, but should I just pay solely on one debt until it is payed before moving to the next, or should I pay a little on each one that is accruing interest?

Thank you for the help!

I would pay in this order:

1) Card B -- no interest until 2007 so you are paying just on principal. It's the smallest one too. Plus, do you know how much the APR is going to JUMP to after 2007?? Pretty high I would guess.

2) Card A -- Next lowest. Plus, the interest is MUCH higher than unsub loan. Un-sub loan is "costing" you less per month than Card A.

3) Unsubsidized Loan -- By now, you should be able to take the payments from Card B and Card A, add them together, then add that to the Unsubsidized Loan's payments. Should be able to knock this one out pretty quick.

4) Student loans -- Would be great if you could pay this off BEFORE you graduate. Then, you have no interest. But by now, you are debt-free except this loan right? So all that money you have been sending to these other cards should be applied to this loan PLUS any extra you can skrimp.

Eat nothing but beans, Ramen noodles and water until you are debt free.
Plus, since you work at IHOP, can you get a discount for food? I don't mean cooked food, I mean buying food from them at discount and cooking it yourself? I bet IHOP buys tons of veggies, etc that you might be able to get on a discount?

Maybe even at cost?

That would rule.

cbmeeks

[jeffrey]

There are 2 opposing opinions on the best way to pay of credit card debt:

Debt Reduction 101 - Pay Off High Interest Debt First

Debt Reduction 101 - Pay Small Bills First Debt Reduction

It depends on your personality which one you choose, but the one that will <b>get you out of debt the quickest</b> is to pay off the high interest cards first.

[cbmeeks]

I could see advantages to either way. However, life isn't that simple. Those examples seem to be very close in interest and amount owed.

For example, let's look at an extreme. If Card A had a balance of $287 at 10% and Card B at $4500 at 22%, which am I going to pay first? Card A. I LIKE that little victory and there is no reason to have such "petty" debts if you make an average salary.

But then again, in my situation, I am going for the higher interst rate van payment over the car payment. They are within $1400 of each other and the van payment is a LOT more per month.

Just a little update:

1. Unsubsidized Loan: $2,684.79 due, 4.700%
2. Credit Card B: $479.72 due, 0% APR until Feb. 2007
3. Credit Card C: $1500.00 due, 0%APR until Sep. 2007
4. Subsidized Loans: $10273.55 due, 0% interest until I graduate (5/2008)

I was working on CC B, but I think it may be smarter for me to work on the loan since it is the only thing accruing interest right now. I do have 1 question though. I have a $2000 limit on Credit Card C... so should I move the remaining balance for Credit Card B over to C, or should I just leave it the way it is? I don't use the cards anymore, so I wouldn't be scared of exceeding my limit... I just know that is very, very close to the limit. Okay, well I look forward to your opinions

[Broken Arrow]

Originally Posted by lisasayzhi

I have a $2000 limit on Credit Card C... so should I move the remaining balance for Credit Card B over to C, or should I just leave it the way it is?

Lisa, what are the terms for both credit cards when the 0% promotion is over?

I mean no offense when I say this, but please don't lose sight of the big picture with what's presented in front of you right now. Those 0% won't last forever, and afterwards, the interest could be double digits and, heaven forbid, retroactive.

Depending on the post-promotional terms, it could be in your best interest to pay them off before the promotion period is over. If that is the case, saving the amount in a high-interest account and then paying it all off just before the deadline could be your best bet.

Knowing the details of the terms will also answer your question whether or not it's in your best interest to consolidate your two credit cards.

Also, you have sparked off a very controversial subject on the internet right now; not just on this forum. That subject is, "Which debt is the best to pay off?" The two obvious camps are to pay the highest interest rate off first versus paying the smallest balance off first.

So far, this has been one of the more friendlier places I've known for such debates because we have fairly articulate and reasonable representatives from both sides. In other forums, this isn't so.

In the end though, I do not believe there is an universal best way. There is only the best way for you; one that makes you sleep the soundest at night. If you're willing to suffer now so you can pay the least in the long run and get out of debt the quickest, then high-interest route may be best. If you're already drowning in debt and need to clear some leeway to snowball, or you need a motivational boost, then paying the minimum balance would be best.

In practice, I realize that even such things are not so clear cut. In fact, I used a little bit of both to tackle my debts. My recommendation is only to make sure that you do what you feel is best, not what the rest of us is telling you is best... because in the end, you are the only one that has to bear the burden of your debts.

You have displayed both the aptitude as well as the drive towards fiscal responsibility, Lisa. I believe you will find that, in the end, that's far more important than HOW you pay your debts off.

Credit Card B: Feb. 2007, the interest rate will be 11.74% (though it's not fixed, so that could change)
Credit Card C: Sep. 2007, the interest rate will be 8.99% fixed

I will work on finishing B, then C, to make sure I don't miss my deadlines, then I'll tackle the Unsubsidized loan, followed by the rest. Thanks for the advice.

[Broken Arrow]

Yeah, if it was me, I would set up a separate (high interest) savings account and save up enough to pay off the credit cards right before the deadline. In the event of an emergency, they could also double as a secondary reserve to your regular emergency fund. Doing that wouldn't be pretty, but real emergencies never are.

[story3girl]

I want to reiterate that I think it's a good idea to also save up enough money to make sure you can pay for your fall fees and books without putting it back on the credit cards. If you know that that bill is coming, it should definitely be your priority, certainly before you try to pay off the student loans.