Car Debt / Credit Card Strategy

[Jb1210a]

Hello All,

Been a very long time since I posted in these forums. Learned a lot a few years ago but made a couple choices that have put me in a minor predicament.

Long story short, I had to move out of a house I shared with my brothers (necessary for custody) and my rent skyrocketed from $350 a month to $1100 a month. Luckily, my salary is enough to cover that, however, shortly thereafter my car (which was paid off) blew a hole in the engine block and became useless. I made an impulse buy on a car I really liked, but added another $450 a month to my budget.

As it is now, I have room to save about $450 a month but am paycheck to paycheck everywhere else. I'd like to move into a less expensive car and am wondering two things.

1. What options do I have in moving to a less expensive car?
2. Has anyone done this and regret doing so?

Additionally, my 2015 resolution is to remove all my CC debt, I've done good but did it without a plan. I'm wondering what the best method is in paying off cards? Is it smarter to tackle the one with the highest minimum first? Highest APR? Lowest balance? I've listed my cards in order of minimum payment / due date and am able to see where I can make excess payments although I am unsure of which one to work on first.

Thanks for the help!

[Bal.Leona]

Welcome (back) to the forums!

Most of the time you'll get recommendations to sell the car and buy something used for cash. How much do you owe on the loan vs. how much you could get for the car if you sold it privately?

If you want to pay the least in interest on your CCs, pay the highest APR anything extra you can and pay minimums on the rest until you pay off that first card, then put that money into paying off the second, etc. However, depending on the total number of cards you have, you may find it a little more mentally rewarding to pay off the lowest balance first. Some people feel less overwhelmed by fewer accounts even if the balance is the same, plus giving yourself some momentum to go "Good for me, I can do this!" when you pay one off.

[Jb1210a]

I owe about 22.5k on it and it's worth in a sale to a private buyer would be about 20.5k according to KBB.com.

Is it a good idea to make minimum payments on credit cards and just keep throwing more cash to the car loan so that I don't owe more than it's worth? It likely doesn't get me out of the loan very soon at all, but it does allow me to have some value in the vehicle.

Please let me know if this makes sense or if there may be a different solution I am not thinking of.

Thanks!

[autoxer]

Is the vehicle depreciating fast or have really bad gas mileage? If not, then you might be better off tackling the credit card debt first.

Also, what is the APR on the auto loan? How is your credit score?

[Bal.Leona]

I'm going to guess the APR on your credit cards are probably higher than the car loan? If that is the case and you're still looking at downsizing, you could consider something like this:

Sell your current car for about 20k
Buy a reliable used car, maybe a small sedan with good gas mileage for 3-5k or so
Use the remaining 15-17k to pay down towards your highest interest debt
Continue paying on remaining debts until paid off

Balances and APRs on the CCs would help too. If you were planning to hang onto the car, I would still pay the minimum on the car payment and all but 1 of your CCs (focus either highest interest or highest balance) and put everything extra to it until it's paid off, then focus on the next one, etc.

Of course, someone else may have better advice or know a reason not to be upside-down on the car loan, but it seems to me you'd want to get rid of the highest interest part first because it's costing you the most extra money.