Which debt to pay off first

**ktmarvels** · 09-15-2007, 12:37 PM

There is something called the snowball method, if you haven't heard of it before here's a little summary. First you pay the minimum on all debts. Then you take all the rest of the money you can and put toward one of your debts (ie. one card). Once the first debt is paid off then you put all available money toward the 2nd debt.

There are two schools of though on how to select the debt, highest interest first and smallest balance first. The benefit of highest interest first is that you will ultimately spend less during the process. The benefit of the smallest balance first is that you get the emotional high of actually paying something down.

Now to answer your question. First, I would consider how long CC#3 will be at zero percent, and what the interest rate will be after that time. Second, I would call the credit card companies and ask them to lower their interest rates (hey, doesn't hurt to ask). Then I would pay them off in order of highest interest to lowest.

**jeffrey** · 09-15-2007, 02:34 PM

These may be of help:

Debt Reduction 101 - Snowball Debt Reduction
Debt Reduction 101 - Pay-small-bills-first-debt-reduction
Debt Reduction 101 - Pay-off-high-interest-debt-first

http://www.savingadvice.com/blog/2007/04/25/101360_snowball-debt-reduction-which-is-best-for-you.html

**disneysteve** · 09-15-2007, 04:06 PM

I agree with ktmarvels. Pay the minimum on 3 of them and all the extra toward the highest interest. Since, in your case, two have identical rates and almost identical amounts, I'd probably pick the slightly smaller one, but either would ultimately accomlish the same thing.

Is the home equity a loan or a line of credit? Loans are usually fixed rates but lines are usually variable.

**Aleta** · 09-15-2007, 05:24 PM

As I add up your numbers, it seems as though you've divided the $1,500. by your total of $65,500 to come up with 5 years to pay them off. It would help if you would tell us what the minimum payments are on each and also when the 0% rate ends. Do you have any other money extra that you can use to pay on one of the loans that you've listed. Just looking, I'd definitely pay off the $11,000 that is the lowest of cards 1 and 2 and with the same interest rate. You would REALLY want to pay off that $7,000 first if your rate will expire soon and your rate will be much higher.

Don't worry about feeling bad about sharing. I bet everyone on this board has been where you are or close to it. We all are here to support and help one another. Now, if you were to go to a friend, that may be different. We all have alot in common here so we understand what you're feeling.

**loanstar** · 09-15-2007, 06:37 PM

Dave Ramsey recommends the snowball effect, whereby you pay off the credit card with the lowest balance first and work your way up, but in your case it wouldn't make sense to pay off a credit card with a zero interest rate whilst you have one that's costing you 12.5%

**debtfreecb** · 09-16-2007, 04:09 AM

Thanks everyone. Please keep the suggestions coming and I will give up period updates of my success (I hope!). Since May I have paid down almost $7000 in debt so I am crazy about making the debt go away.

**disneysteve** · 09-16-2007, 05:03 AM

Originally posted by debtfreecb View Post

Since May I have paid down almost $7000 in debt so I am crazy about making the debt go away.

That's great! Keep it up at that rate and you'll see those balances falling nicely.

**DavidSB1950** · 09-16-2007, 05:16 AM

Keep it up!... Our approach for debt payoff is "the biggest bang for the buck"... In other words which debt when paid off would release the most monthly funds for attacking another debt... however, we dont consider the house mortgage or any 0% interests in the mix... those are the last and second-to-the-last ones we will attack.

**Aleta** · 09-17-2007, 07:51 AM

To the above poster: Your're right and that is a valid point. Sometimes, you can have a debt that is lower on the ladder, but has a large monthly payment. There are all kinds of variables that you have to consider when paying off debt.

Recently, I was surprised to her Suze Orman say that if you're in debt and need emergency money that equity line of credit is good, although she would prefer you to use your credit card, since it not secured as your HELOC is. She says alot has to do with how soon one can start working again or to begin paying back the loan.

Which debt to pay off first