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    Debt payoff on car or student loans first?

    I have about $15,000 in savings, but about $60,000 in debt.

    -10k car loan at high interest rate
    -27k in student loans
    -15k medical bill
    -5k due to IRS

    I am 28 years old, make about $28,000 a year, and have a good pension plan through my job. What advice would you recommend to pay off these debts?

    #2
    Originally posted by NTQJosh View Post
    I have about $15,000 in savings, but about $60,000 in debt.

    -10k car loan at high interest rate
    -27k in student loans
    -15k medical bill
    What are the rates on those loans?

    What are the monthly payments?

    How about CC debt? (I don't see any listed, and that might be a good thing.)

    Are the SLs deferred?

    -5k due to IRS
    Pay that off immediately.

    have a good pension plan through my job.
    IMNSHO, that "good pension" is going to disappear long before you retire in 27 years. You need to start saving now in a 401(k) or IRA.

    What advice would you recommend to pay off these debts?
    • Live within your means That means to make a comprehensive budget and stick to it!!!
    • Cut all superfluous expenses.
    • Cut the smoking, and most of the drinking. They're both really expensive, and the money can be used for increasing your net worth by reducing your debt.
    • Leave "some" money for fun. You'll be more likely to stick to your overall budget that way.
    • Minimize the number of commercials you watch. They're the result of many decades of scientific reseach into the best ways to make you spend, spend, spend but that's not very good for your budget.
    • What about Wife/GF and children? The right one is crucial to your fiscal health.

    Comment


      #3
      Do you have an emergency fund? If not I'd keep $1000-$1500 in your savings account.

      Next I'd pay the IRS and get that monkey off of your back.

      Then put the remaining $8500-$9000 towards the car loan. Then finish paying it off.

      This will get you off to a great start because one debt is gone and the second will be gone in a month or two.

      Of course this assumes you're living below your means and all of these debts are current. At $28K income you don't have room for error.

      Can you earn extra income?
      Phil Danley
      100% Debt Free since 2014
      http://www.ConsumerDebtCoach.com

      Comment


        #4
        Originally posted by NTQJosh View Post
        I have about $15,000 in savings, but about $60,000 in debt.

        -10k car loan at high interest rate
        -27k in student loans
        -15k medical bill
        -5k due to IRS

        I am 28 years old, make about $28,000 a year, and have a good pension plan through my job. What advice would you recommend to pay off these debts?
        I agree with keeping a couple thousand as an emergency fund and throwing all the rest at debt. Pay off the IRS regardless of interest rates. They are just bad, bad, bad news to owe money to. Write that check today! Then pay off as much of the high interest car loan as you can.

        Your biggest problem is that you earn very little. Hopefully you are actively pursuing a better job. At the very least, as a temporary fix, look into a 2nd job to boost the income until the better job comes along.
        Steve

        * Despite the high cost of living, it remains very popular.
        * Why should I pay for my daughter's education when she already knows everything?
        * There are no shortcuts to anywhere worth going.

        Comment


          #5
          I think you should clear your car loan first as the interest rate is high.

          Comment


            #6
            Originally posted by NTQJosh View Post
            I have about $15,000 in savings, but about $60,000 in debt.

            -10k car loan at high interest rate
            -27k in student loans
            -15k medical bill
            -5k due to IRS

            I am 28 years old, make about $28,000 a year, and have a good pension plan through my job. What advice would you recommend to pay off these debts?
            I dislike uncertainties so I try to minimize them.

            You should pay off the car loan first if it is upside down (which it probably is) because if you total the car, you'll have to come up with any differences between insurance payout and loan amount. This is going to be anywhere from $1 - $10k, and in your financial state (low income), it is a significant unknown.

            The other debts should can all have regular payments without any surprises. Don't pay the medical bill AT ALL, that's right, don't pay it until you've paid off all the other bills.

            Make the required, noramlly scheduled payments on rest of bills (except medical bill).

            Comment


              #7
              Originally posted by sv2007 View Post
              The other debts should can all have regular payments without any surprises. Don't pay the medical bill AT ALL, that's right, don't pay it until you've paid off all the other bills.

              Make the required, noramlly scheduled payments on rest of bills (except medical bill).
              Am I correctly understanding that you are advising him to go into seriously into arrears on a debt? Even knowing that will affect his FICO for years to come?

              Comment


                #8
                Originally posted by Nutria View Post
                Am I correctly understanding that you are advising him to go into seriously into arrears on a debt? Even knowing that will affect his FICO for years to come?
                Think for a bit.

                Then answer the OP's question pretending to the best of your ability that you are in OP's shoes.

                That's how I answer.

                Comment


                  #9
                  Originally posted by Nutria View Post
                  Am I correctly understanding that you are advising him to go into seriously into arrears on a debt? Even knowing that will affect his FICO for years to come?

                  Once researched and reasoned, you may just agree with me. Or not, but I stand by exactly with what I typed. It would be my plan of action if I were in OP's place.

                  Comment


                    #10
                    Originally posted by sv2007 View Post
                    Once researched and reasoned, you may just agree with me. Or not, but I stand by exactly with what I typed. It would be my plan of action if I were in OP's place.
                    There's nothing to research and no reasonable plans can be formulated unless and until we know what his complete financial picture looks like.

                    Also, most hospitals offer hardship discounts and extended payment schedules. We don't know if he's looked into that or not.

                    If Josh paid the $5K IRS bill and $9K of the $10K car note, then he'd have a small EF, and within a month or two could pay more than the minimum on the medical and SL debts. (Heck, the next mandatory car note wouldn't be for another year or more. Thus, he could make smaller car payments too, then.)

                    Comment


                      #11
                      Originally posted by Nutria View Post
                      There's nothing to research and no reasonable plans can be formulated unless and until we know what his complete financial picture looks like.
                      Seriously, life almost never gives anybody the entire picture. We have to act based on incomplete information; those that act better are more successful than those that don't.

                      It's not a criticism of you but a general statement about life.

                      Comment


                        #12
                        Originally posted by sv2007 View Post
                        Seriously, life almost never gives anybody the entire picture. We have to act based on incomplete information; those that act better are more successful than those that don't.
                        An adviser asking for information that OP already knows (IOW, complete information) is fundamentally different from trying to find out who the "best" (what does that even mean, and how do you determine it?) doctor in a certain city is.

                        Comment


                          #13
                          Originally posted by Nutria View Post
                          Also, most hospitals offer hardship discounts and extended payment schedules. We don't know if he's looked into that or not.
                          Hospital bills are kind of strange.

                          Most loans you sign a contract stating the amount you owe and terms. I.e. you agree to it. Nope, not our hospitals. Here, you sign a contract to pay for something reasonable. Now, courts always side with the hospital, but once you get there, things are even better (for you IF you've not paid anything). Now, what's reasonable cannot be determined because the contract you signed didn't have any amount on it. If you follow this research path, you may realize that hospital bills might actually be the lowest priority loan.

                          That reminds me of a superman movie I was watching with an ER doctor who was (as usual) telling me how bad patients are and they don't pay (most? ER docs are contractors not paid by hospital). At the end of the movie, superman is injured and in a hospital room; then he just left (assuming he felt better). So I commented "there goes another non-paying patient".

                          Anyway, following my advice will probably increase my hospital bill, so maybe I should just say "pay hospitals first" ... only if I were so selfish.

                          Comment


                            #14
                            Pay off the IRS first, as they have stronger collection powers. Then go after your debt in order of interest rate, highest to lowest. If the interest rates on your loans are very high, you might want to look into consolidation in order to lower the overall rate.
                            Thinking Capital

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