What to do with these two debts

**ctigers0714** · 07-24-2013, 11:52 AM

How many months of bills would you have to use to pay off the credit card debt using your emergency fund? The interest in the emergency fund is negligible, but you want to always have that safety net which is why I would lean towards replenishing that before throwing extra money at the car loan.

**kork13** · 07-24-2013, 04:16 PM

You haven't given us much information at all, so I'm kinda hesitant to give advice based on so little info about your full situation....But as a starting point, I've got a few questions:
- Exactly how much is in your Emergency Fund right now? (dollar amount)
- What are your average monthly income and expenses?'
- Are these your only two debts? What other cash/invested/retirement assets do you have?
- Where did the CC debt come from? How likely is it that you may end up with more credit card debt in the future?
- After September, what will the credit card's interest rate rise to?
- Are you able (and willing) to find and qualify for another 0% (or other <3% interest) credit card transfer offer?
I'm tempted to ask about more of your situation, but I'll quit there.

The advice I will give right now is this: do NOT drain your emergency fund if doing so will put you below 3 months' expenses. I see that as an absolute minimum for safety's sake. I can see the logic in paying off the CC if the rate will rise up above 10-15% or more... Just be VERY careful in how you do it.

Realistically, you need to do everything you possibly can to get that car loan knocked out. Unless you make an exceptionally good income ($200k+/yr), your $42k car loan is a little mind boggling.

**YourDailyFinance** · 07-24-2013, 07:05 PM

Honestly there needs to be a little more information. How much do you have in your emergency fund? Are these the only two debts? All things equal I would pay of the card before September while its still 0% but the question then is what does it go to after and will you be charging the card up again? Not need to spend emergency funds if you gonna put a balance right back on the card. Pay it off and then tackle the car loan. If you could make a better return the the interest you owe on the truck I would invest the monthly payments that were going to the CC or pad you savings.

**snafu** · 07-24-2013, 08:56 PM

If you are willing to list income and expenses, it could potentially identify areas where small improvements can compound to free up funds to accomplish your goals. Is there anything you no longer use or enjoy that could be sold to free up cash? Are there any cuts to expenses you would be willing to make for a short term to clear CC debt?

**bjl584** · 07-25-2013, 05:54 AM

We need more info.

But, without knowing anything I'm going to guess that you bought way too much car for your income. Selling the car and buying something more reasonable will get rid of your auto loan worries.

**feh** · 07-25-2013, 08:45 AM

Originally posted by kork13 View Post

Unless you make an exceptionally good income ($200k+/yr), your $42k car loan is a little mind boggling.

I'd say that car loan is mind boggling regardless of income.

**jbmb11** · 07-26-2013, 06:17 PM

wow, thank you all for the response. Let me be a bit more specific

- Exactly how much is in your Emergency Fund right now? (dollar amount)
20K

- What are your average monthly income and expenses?
Monthly income 6K expenses 4K - 4.5K
Auto Loan $805
CC $300
Water & Trash $100
Cable $80
Phone & Internet $90
Cell Phones $100
Auto Insurance $200 (2 Cars)
Electric $200
Auto Gas $500 (2 Cars)
Property Tax $400 (broken down to a monthly rate)
Groceries & Eating Out $600
Emergency Fund $1000
No Mortgage (First thing we knock off)

- Are these your only two debts? What other cash/invested/retirement assets do you have?
Only DEBT.. Other is normal home bills that are in my expenses of

- Where did the CC debt come from? How likely is it that you may end up with more credit card debt in the future?
Wife's baggage when we got married. No issue with new credit card debt.

- After September, what will the credit card's interest rate rise to?
14.99%
- Are you able (and willing) to find and qualify for another 0% (or other <3% interest) credit card transfer offer?
Yes, this is what she has been doing but it normally cost her $300 each time she transfers, which to me is a waste of $300. We are paying $300 each month to the card as well

Now about the car loan. For our family we got a New mid size SUV (GMC Acadia) nothing too flashy but I did not put a lot down (Cash) towards it, my mistake, but we do pay more towards the loan so we should have this loan paid in 3.5 instead of 5 yrs. We would not have done it if we could not afford the monthly payments. We bought new due to our experiences with used vehicles. Plus we never had new vehicle ever and this is our first family car.

**feh** · 07-26-2013, 06:45 PM

Originally posted by jbmb11 View Post

Now about the car loan. For our family we got a New mid size SUV (GMC Acadia) nothing too flashy but I did not put a lot down (Cash) towards it, my mistake, but we do pay more towards the loan so we should have this loan paid in 3.5 instead of 5 yrs. We would not have done it if we could not afford the monthly payments. We bought new due to our experiences with used vehicles. Plus we never had new vehicle ever and this is our first family car.

Hopefully you won't take this the wrong way, but you don't have a debt reduction problem. You have a spending problem. The fact that you spent >$42K on a car because "you could afford the monthly payments" speaks volumes. The first thing you should do is sell that vehicle and replace it with something less expensive.

Hopefully others will suggest books or other resources on spending/budgeting. If I had some handy, I'd provide them.

**jbmb11** · 07-27-2013, 08:23 AM

feh,

I do not take offense to your comment, I appreciate your response.

I'm not sure we have a spending problem. We have multiple CC's with $0 balances, our house is paid off We really only have two debts that are not problematic, but more as something I want off my financial plate. I believe strongly if something can be afforded, then go ahead and make the purchase. We are not rich by any means and we pay our bills on time. We do put away for an Emergency Fund. When I posted this thread I was looking for advice on how to efficiently pay down or pay off these two debts. I probably should have mentioned that in the beginning and for that I apologize.

I respect everyone's comment on this thread and I absolutely do not want to come off as snobby or unappreciative. I am not a financial wizard or the best saver when it comes to money and I do need advice on better financial situations from time to time.

**ctigers0714** · 07-29-2013, 05:46 AM

I think the best course of action is to use your EF to pay off the CC debt because it seems like it is somewhat of an annoyance to you having to switch 0% cards all the time. You have enough leftover income each month to quickly re-up your EF (which I think should be around 25k based on your expenses). After all that, put any extra money you have towards the car loan and you'll be completely debt free in a few years. Congratulations!

What to do with these two debts