Im a newb here so let me first post my debt info:
I have 5 main credit cards that I want to get paid off.
- $290 ($900 limit) 0% apr til January $10 payment per month
- $1810 ($2000 limit) 22.5 apr $47 payment per month
- $5645 ($6000 limit) 22.5 apr $146 payment per month
- $6082 ($8400 limit) 6.99 apr $94 payment per month
- $4844 ($5500 limit) 0% apr til August $72 payment per month
I’ve also got about $300 a month worth of student loans, but I’m not worried about those right now.
I’ve already heard about the idea of paying off the smallest first to the biggest, but what makes the most sense financially. I get a bonus next week that will be about $1500, where should I put it? I can afford about $300 a month extra to go towards payments, which one should it go to?
Thanks for taking the time to help!
I would still start knocking them out in order, smallest balance to largest. If you have $300 extra to go towards the debts anyway, #1 is going to be gone in a month any way you look at it. Get that paid off and have one less card on your list. Paying the other $1200 of the bonus and $300 extra is going to knock out #2 within a couple months and then you have only 3 cards and $357 MORE to go on card #5, you next smallest.
I envy you. Your snowball is rolling pretty quickly. I have three cards…and my lowest balance is still about $9900.00. Its going to be a long while before my snowball rolls. I just have to remind myself that each month I am getting myself in a BETTER situation, it isn’t getting worse, so even though I can’t yet pay one off, I am improving my situation. That has to be enough for me.
In case you decide to get some quick cash for your emergency expenses – there is a great company named ElcLoans – they offer payday loans online without credit checks. Therefore you can use their services to get some cash and do not worry about your credit score at all.
Apply your entire bonus to debt #2, in Jan. balance transfer debt #1 to Debt #5. Apply extra monthly payment to debt #2 until paid off. Once paid off add the monthly payment to your extra monthly payment and apply to Debt #3. Then once it is paid off, apply all extra monies toward either debt #4 or 5 which ever has the highest interest at that point. The name of the game is to minimize the interest paid out. Do not close any cards once paid off, just leave dormant. Consider appying for other 0% interest cards and balance transfer highest rate balances while paying off debt.
Now is the time to eliminate debt! Do not look at what makes sense ‘financially’, look at what will get you going and keep you going. That is why Dave Ramsey suggests the snow ball method.
Pay off #1 now. Put the 1500 towards #2 plus the extra $300 and you have 2 CCs gone in 2 months.
Take extra $57 you no longer pay towards them, along with the extra $300 and put it towards #5. Even though it is zero interest, get it behind you where the CC cannot change their mind on the zero interest. In less than a year, # 5 is gone.
Take the $329 and go after #3, and then #4. Any more bonuses or extra cash go towards the lowest.
This method gives positive incentives quickly and helps keep you going and not quit. Taking on the biggest mountain first tends to get discouraging.