What should we pay off first?
Okay, we’re going to have about 10K coming in March to pay off debt….where do we start?
I was thinking about paying off the credit cards with the highest interest rates off first….is that the way to go?
Or should we pay off the negative equity on our car which is 10k, and get rid of it or refinance it…..we cannot get it refinanced because of the -equity. We are due to pay $470 per month for 6 yrs on a car that is worth 11K!
We have a lot of credit debt, like right off the bat a 17% interest rate on a maxed out 5k water system. & there’s a 2K Dell account, a 1K capital one, 1K Fingerhut, 2.5K Sears.
But we just bought our first home in August, its the same in mortgage as we were spending on rent…so its good! BUT there are some major repairs needed….we need a fence in the front for safety for our kids, 1K in plumbing, $600 water heater, 6 cracked windows, bathroom floor needs replacing…thats about it, OH and the electrical system needs to be updated but that can wait…….
Dh was thinking we should try to get rid of our car with 5K because a dealership recently offered to swallow 5k in -equity if we came up with the other 5K….but we didnt have it. IF we keep the car as it is with a 13% rate, we’ll end up paying over 30K for it in the long run and we only make 30K per year.
Please help, we dont know where to put our money, we dont want to put it in the wrong place.
Tagged with: 30k • Electrical System • Fingerhut
Filed under: Personal Finance
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Pay off/down your credit cards first! This will have a dramatic effect on your credit score, which will give you more options in dealing with the car later on. No matter WHAT the dealer offers you, it is in THEIR best interest… don’t go from being upside down in one vehicle to the next one. Get your score up, interest rates will drop on cards and car loans, and in time things will start to fall in place. Speaking from personal experience!
I’m with you on the credit cards. They are costing you the most to carry. Maybe take 2 grand and get the fence and water heater and then put the rest toward the credit cards.
You need to understand the difference between good debt and bad debt……yes there is sucha thing. Your mortgage, your car….even a student loan is good debt; as long as you’ve been keeping up the monthly payments. This shows consistency in your financial responsabilities. Bad debt is your credit cards,,,,,,all types; major and departmental. Pay off all the cards, starting with the highest interest first. If you have money left over, set it into a bank account so you have a steady income for your car payment.
As for the household repairs…..try to get as much done WITHOUT using money you don’t have. Don’t use your recently paid off credt cards to buy home repair stuff……..two steps forward and three steps back.
Just as Suze Orman says PAY OFF THE HIGH INTEREST CREDIT CARDS!!! Her advice is amazing also do not refinance anything it will just cause problems later on. Make sure your mortgage rates are fixed and not adjustable. As for the repairs once you pay off your really bad credit cards use the rest of the money to make the repairs for the safety of your family. That’s what I would do….hope this helps!
Good thing I am a financial advisor..and good thing I am giving free advice….for your sake.
Lets start with the repairs. Take 1k to pay off capital one. I obviously don’t know the interest on that but get it out of the way. Take the money you were using to pay that bill and start a “repair account”. Prioritize which repair should come first when you reach a good number (at the very least 2k).
Get rid of the car. I have no other opinion on the car. Get the damn thing out of your life immediately. It is worth it in the long run.
That leaves you with 4k. Pay off Dell. Pay off Fingerhut.
Take the remaining 2k and start an emergency fund. Incase anything goes wrong you will have this money to continue your lifestyle. Contribute the Dell and Fingerhut payments to this fund now that they will be paid off.
Keep paying sears off as best you can…some debt is okay. Nothing over 2k though.
YOUR REPAIR AND EMERGENCY ACCOUNTS ARE TO BE SEPARATE AND IN MONEY MARKET ACCOUNTS.
Get rid of the car first, because you are paying 13% and its value will continue to depreciate…this is a no-win situation. Cars are the worst thing to spend a lot of money on. Then, if you think there is the slightest chance of losing your job in this bad economy, I would keep the rest in the bank, unless you already have savings equal to six months of your monthly expenses. Right now, cash is king, as they say. Having a safety reserve is critical in today’s economy. On the remaining debts, pay off the credit cards next and cut them up until they are paid off. Rent the movie called “Maxed Out” to get a real education on the credit card business. Make the normal payments on all of your other debts.