Is this the right path?

[Army wife]

I'm proud to report that I'm down to the biggest items of debt! That being said I'm being very careful how I handle the rest. I already have a budget,menu plans and a snowball spread sheet. Although my student loans are a collective bigger amount I'm opting to pay the car off first and snowball the payment. I'm also going to place a call to my insurance company and to the can financiers and see if my improved debt to income ratio can work any magic. Does anyone have any suggestions for me?

[disneysteve]

Hi. It is kind of hard to give any advice with no information about your situation. If you list the specifics we can try and offer suggestions. List each debt with balance and interest rate. If you are looking for budget advice, listing your income and expenses would be very helpful too.

[Army wife]

So here's a breakdown of the debt I'm dealing with. I'm not listing the house since we'll be selling it in the upcoming years. I'll have $300.00 at the end of each month to save/snowball.

Car loan $19,000 @ 5.3% paying $353. monthly
student loan 1 on deferment $13,132.00 @ 5% expected to pay $57 monthly
student loan 2 on deferment $33,200.00 @ 5% expected to pay $156 monthly

My plan is to pay off the car first by adding $50-$100 a month to the payment. That leaves me $50 a piece to put towards each student loan at the moment. It's not ideal but at least it's a payment. In 3-4 years when the car is paid then the payment will be snowballed into the smallest of the loans. For the moment my house runs on one income that's small but we're working to change that and so our plan is simple for now.

Any advice?

[disneysteve]

Make sure that when you send extra money to the car loan that it gets applied to principal and not as extra payments. Car loans, unlike mortgages, often don't have a line on the payment coupon (or the online form) to do this. You may have to call the lender and find out exactly how to do it.

The normal advice is to pay from highest rate to lowest rate. In your case, there really isn't much of a difference. Still, paying the car first is the way to go.

[Army wife]

Make sure that when you send extra money to the car loan that it gets applied to principal and not as extra payments. Car loans, unlike mortgages, often don't have a line on the payment coupon (or the online form) to do this. You may have to call the lender and find out exactly how to do it.

The normal advice is to pay from highest rate to lowest rate. In your case, there really isn't much of a difference. Still, paying the car first is the way to go.

There's a spot on the e-payment form for the car to add payment to principal only. Thanks

[Petunia 100]

If you are not required to pay on the student loans yet, then don't send them anything. Send that money to the car loan instead. It is better to make a lot of progress on one debt than to make some progress on 3 debts.

Do you have an adequate emergency fund? If not, then focus on that before you pay extra on the car loan.

Best of luck to you with your goals.

[Army wife]

If you are not required to pay on the student loans yet, then don't send them anything. Send that money to the car loan instead. It is better to make a lot of progress on one debt than to make some progress on 3 debts.

Do you have an adequate emergency fund? If not, then focus on that before you pay extra on the car loan.

Best of luck to you with your goals.

Loan 1 starts payments at the end of February and the other isn't due until April. Thanks to a Christmas bonus we'll have just under a grand in savings if not a bit more by February. My main focus is the car loan with a goal of paying an extra $100 every month towards it but I know that at times it'll need to be less..we have what I assume will be a hefty ER bill coming shortly and that will take priority.

[Like2Plan]

Had you thought of refinancing your car note to a lower interest rate?

USAA has
"For a limited time, get rates as low as 1.49% APR with discount for new cars and 2.69% APR with discount for used cars with up to 100% financing on cars, trucks, vans and SUVs.2"

PenFED has 1.49% new or used. There may be restrictions on the PENFED used car notes, I believe someone inquired and they would not finance a vehicle with more than 100K in mileage, but it wouldn't hurt to see if you qualify.

I would not recommend extending the term of the loan beyond what you have left right now, but this might save you a little bit in interest expense.

[bjl584]

So here's a breakdown of the debt I'm dealing with. I'm not listing the house since we'll be selling it in the upcoming years. I'll have $300.00 at the end of each month to save/snowball.

Car loan $19,000 @ 5.3% paying $353. monthly
student loan 1 on deferment $13,132.00 @ 5% expected to pay $57 monthly
student loan 2 on deferment $33,200.00 @ 5% expected to pay $156 monthly

My plan is to pay off the car first by adding $50-$100 a month to the payment. That leaves me $50 a piece to put towards each student loan at the moment. It's not ideal but at least it's a payment. In 3-4 years when the car is paid then the payment will be snowballed into the smallest of the loans. For the moment my house runs on one income that's small but we're working to change that and so our plan is simple for now.

Any advice?

I agree that paying off the car first is best, but you mentioned nothing of any savings. Do you have any? If you don't have an emergency fund it may be a good idea to direct some of your money into building one.

[SeanH]

Have you considered selling the car and getting a cheaper one? That seems like an awfully large balance to have when it appears you are paying "interest only" on your student loan debt? My apologies if I am misunderstanding the deferment, but if I'm not you'll pay thousands in interest on the loans before you even touch their principal.