What's better, pay off or save?

[Scanner]

I have to agree with DisneySteve - go for the highest interest rate.

I am going to go with a major debt reduction. If you have an extra $1000/month, I'd probably deploy 80% into debt reduction and 10% into an EF and 10% into short term savings.

You've got $27,000 of debt there you are servicing and none of it is supporting an appreciating asset (or even a level asset) like a house.

It's kind of corny but I heard a financial speaker who speaks to chiropractors (my profession) and dentists and he used to say,

"People in debt do not accumulate wealth."

Sounds kind of over-simplistic but it has some truth.

I don't know that it's 100% true but I beleive it's 75% true.

[poundwise]

go for the highest interest rate.

This logic makes sense but does not exactly apply to the situation. The OP has a credit card with a temporary rate. The balance is something that can be killed off in relatively short-order, certainly when compared to $20K, and so the credit card needs to go first. Of course, there is no debate here if the card goes from teaser rate to 14% or something similar.

There is a nice emergency fund in place now but the goal should be (based on the OP's desire to increase it) to set aside an amount that would/could cover 3-6 month's of expenses.

Since there IS a base emergency fund in place now, I will reiterate my earlier suggestion. Keep that fund in tact or even use some of it to help pay off the credit card, if need be. Then turn your attention to two goals at once: increase savings, eliminate vehicle debt.

Personally, I'd be looking into selling the car and getting a less expensive one that I could either pay for or that I could pay less interest on with payments not extending out past 36 months. As stated in another response, $20K at 12% for a depreciating asset is just not an acceptable arrangement.

If not, then seek to refi it and/or get intense about paying if off by, as I suggested, doubling up payments, etc.

Best wishes to you.

[Kate Ann]

thanks so much

I really appreciate all the feedback and suggestions.

I thought I'd add in that I just bought that car in October. It's pretty new, so I've only been making payments since Nov 2006. This month I'm sending in an extra payment (that's actually almost $100 more than my regular payment). I don't think I can get a lower interest rate. My ex pretty much trashed me financially, and I'm just now getting my credit score up.

But, I do use the car for work purposes...1099 employee....work from home and travel for work etc....so I think that's how I get the write-off.

Anyway, I'll definitely be taking all your suggestions into account, and getting myself in a better place financially.

Thanks!

[Adambnn]

So you have decided it. Any way, its a good choice

[myself]

This logic makes sense but does not exactly apply to the situation. The OP has a credit card with a temporary rate. The balance is something that can be killed off in relatively short-order, certainly when compared to $20K, and so the credit card needs to go first. Of course, there is no debate here if the card goes from teaser rate to 14% or something similar.

There is a nice emergency fund in place now but the goal should be (based on the OP's desire to increase it) to set aside an amount that would/could cover 3-6 month's of expenses.

Since there IS a base emergency fund in place now, I will reiterate my earlier suggestion. Keep that fund in tact or even use some of it to help pay off the credit card, if need be. Then turn your attention to two goals at once: increase savings, eliminate vehicle debt.

Personally, I'd be looking into selling the car and getting a less expensive one that I could either pay for or that I could pay less interest on with payments not extending out past 36 months. As stated in another response, $20K at 12% for a depreciating asset is just not an acceptable arrangement.

If not, then seek to refi it and/or get intense about paying if off by, as I suggested, doubling up payments, etc.

Best wishes to you.

Some things you forgot

• the OP may be able to get another CC (or may already have one) that can cover the full CC balance.
• since the OP is current on her payments on the CC, they can ask to have the rate set to a lower rate (instead of 14%+).
• $1,000/month will kill that car loan pretty quick too (although admittedly not as fast as the CC)

To the OP:

• The only way you can write-off the interest on the car loan, is if it's a business expense. Otherwise, you're being very, very aggressive in the tax write-off area!
• I'd personally pay down the car loan as quick as possible.
• You may have additional credit lines that you can get fixed rates for "life of the loan". I know I've seen them with our Discover card (fixed at 3.99% or so).

[Scanner]

The only way you can write-off the interest on the car loan, is if it's a business expense. Otherwise, you're being very, very aggressive in the tax write-off area!
I'd personally pay down the car loan as quick as possible.

It's possible to take it as a depreciating asset.

[Hot dog]

You have $4,600 for an emergency already. I would put an extra 1200 toward the cc and in three months have it down to 3,400 plus whatever your regular payment has brought it down to and take the emergency fund and pay it totally off and have 1200 left in your emergency plus the 1200 that you would have paid toward the cc cause it will be paid. The car interest is way high work as fast as you can to get rid of it maybe transfer it to a fixed for life cc. Good Luck! Having an extra 1200 a month isn't the worst problem to have to try to figure out.

[ginene]

I think you should split it. Let half of what you wanted to save go to your savings and then the other half on your credit cards.

[Ima saver]

I personally would attack the credit card first and get it paid off.