140

Every $1,000 you use to pay off a 26% interest rate card saves you $260 / year. Every $1,000 you use to pay off a 23% interest rate card saves you $230 / year. Every $1,000 you put in a savings account earning ~0.5% interest earns you $5 / year. Having cash on hand is good in case of emergencies, but typically if your debt is on high interest credit ...


121

If the rate is the same, then clearing one card to zero does have one advantage: getting your grace period back. Generally when you owe money on your credit card, and you make a new purchase that new purchase get charged interest starting on day one. But if you are not carrying a balance, in other words you pay off the charges every month, then new ...


92

But what should I be expecting? How much trouble am I in? If you graduated with $134,181 in loans at a rate of 9.3% you'd expect a repayment amount of $1,722/month for 10 years. If you make $70,000/year you'd have ~$2,617 after your loan payments each month, and if the $1,800 monthly living expense you mention is sustainable during loan repayment then you'...


88

First off, your commitment to paying down debt and apparent strong relationship with your brother is admirable. However, I think you are overcomplicating your situation and potentially endangering your relationship by attempting to combine debts in this way. You could consider a simple example where you have interest bearing at 5% and your brother has ...


79

IMHO, you made a very poor choice with school selection. When we make poor choices as adults we have to write checks to solve those problems. Yours is one that will cost you well over 140K, and quite possibly more. For the price of your last year, you could have attended a state university for 4 years and made a very similar salary. When one does not ...


68

Congratulations on your engagement, and on your desire to begin your marriage debt free. Your fiancée can give you up to $14,000 per year as a gift without having to pay any gift tax. Above that, there are lifetime gift/estate tax exclusions that apply. You, as the recipient of the gift, do not pay any tax on it. (It is not considered income for you.) ...


65

If it were me, I would pay off the 23%er. That is as long as you don't borrow anymore. Please consider "your hair on fire" and get that 26%er paid off as soon as possible. From my calculations your big CC is sitting at 26% has a balance of 20K. Holy cow girl, what in the world? The goal here is to have that paid off in less than one year. Get another ...


63

Paying off your house quickly should be a #2-level priority, behind making sure you have some basic savings but definitely ahead of any investing concerns, because your house is not an investment; it's your home. (If you're brave/foolish enough to try buying houses-as-investments in the current climate, this obviously doesn't apply to you!) This isn't a ...


59

You've been tricked into an inappropriate lifestyle And the student loan companies did it. Their motivation is the positively insane interest rates for loans which cannot be discharged in bankruptcy. You are their cash cow. You are doing exactly what they want. Money is distributive. Money spent on something else is not spent on tuition, which ...


58

Do not use your IRA to pay off this debt! If the penalties are indeed as high as you state, it's like paying almost 50% interest on your debt! Your $3500 balance is real money. You can consolidate your rollover accounts if you don't like having small amounts in several places. It's not just some "random account". If you had $3500 in cash right now, would ...


57

It is true that all else being equal, you will pay a lower amount of total interest by paying down your highest interest rate debts first. However, all else is not always equal. I'm going to try to come up with some reasons why it might be better in some circumstances to pay your debts in a different order. And I'll try to use as much math as possible. :)...


55

By paying the $11,000 into the 2.54% loan you will save $23.30 in interest every month. By paying the $11,000 into the 3.625% loan you will save $33.20 in interest every month. If your objective is to get rid of one loan quicker so repayments can go to the other loan to pay off sooner, I would put the $11,000 into the 2.54% loan and pay that off as quick as ...


53

In general, the earlier you apply a payment, the better, because future payments will include less interest and more principal (the mortgage balance is lower, so less interest has accrued). If you have the $1200 now, then it makes sense to put it on the mortgage immediately. However, if you'll have to save $100 per month for a year and then pay it on the ...


47

If it was me, I'd cut my lifestyle and be done with the debt. You make a great income and I assume you take home around 6000/month. The IRA is not very much and you will probably need it in retirement. This statement alarms me: In order to survive I had no choice but to use my credit cards It was unlikely that dramatic, if you chose to NOT to use ...


47

While you have credit card balances that are accruing interest, you should not be charging anything new to the credit cards. There are a few reasons for this. When your credit card has a balance that is accruing interest, then any new charges will start accruing additional interest immediately. That means each purchase you make is costing you much more ...


45

Very good Ben, in a more simplistic form: If debt was about math only, we would not have payday lenders, 21% + credit cards, or sub-prime car loans. Yet these things are prevalent. Debt reduction is often about behavior modification. As such small wins are necessary to keep going much like a 12 step program; or, gamification as Ben pointed out. The ...


44

First, before we talk about anything having to do with the credit score, we need the disclaimer that the exact credit score formulas are proprietary secrets that have not been revealed. Therefore, all we have to go on are broad generalities that FICO has given us. That having been said, the credit card debt utilization portion of your score generally has ...


39

I would take a closer look at each provider. I have one credit-card provider who when there is a large portion of credit available, they frequently offer promotions on balance transfers so you fill that credit, sometimes it can be 0% for xx months, or a very low % until paid off in full. If this is the case clear that card fully and balance transfer the ...


38

The first step is to stop adding to the problem. Get on a written budget, cut expenses to the bone, have a modest emergency fund (1-2 thousand) just to help you get through true emergencies without borrowing money, and get as much of it paid off as you can. You might be able to consolidate the debt into, say, a new mortgage, but you need to be careful to ...


35

As a new graduate, aside from the fact that you seem to have the extra $193/mo to pay more towards your loan, we don't know anything else. I wrote a lengthy article on this in response to a friend who had a loan, but was also pondering a home purchase in the future. Student Loans and Your First Mortgage discusses the math behind one's ability to put a ...


34

For some people, it should be a top priority. For others, there are higher priorities. What it should be for you depends on a number of things, including your overall financial situation (both your current finances and how stable you expect them to be over time), your level of financial "education", the costs of your mortgage, the alternative investments ...


34

The difference in interest is not a huge factor in your decision. It's about $2 per month. Personally I would go ahead and knock one out since it's one less to worry about. Then I would cancel the account and cut that card up so you are not tempted to use it again. To address the comments... Cutting up the card is NOT the ultimate solution. The ...


32

See many past answers: you will usually save the most money by paying off the highest-intetest-rate loan first. (Remember to allow for tax effects, if any, when comparing real interest rates.) Some folks are more motivated to simplify their finances than to save money; in that case you might pay off the smallest loan first.


31

As you noticed, there are diminishing returns on the interest savings as you get closer to paying off the loan. Certainly, the quicker you pay off the loan, the more interest you save. However, the total interest under the normal 10 year terms is fixed at $9178, and you can't save more interest than that. Therefore, the rate of increase of the interest ...


30

There are several ways you can get out of paying your student loans back in the USA: You become disabled and the loan is dismissed once verified by treating doctor or the Social Security Administration. You become a peace officer. You become a teacher; generally K-12, but I have heard from the DOE that teachers at state schools qualify as well. So the "...


28

If the savings rate is the same as the loan rate, mathematically it doesn't make any difference whether you pay down the loan more and save less or vice versa. However, if the loan rate is higher than the savings rate it's better to pay it down as fast as possible. The chart below compares paying down the loan and saving equally (the gradual scenario), ...


28

With all due respect to The David, the $1000 is best put against 20%+ debt, no sitting in checking as part of some emergency fund. I'd agree with the decision to pay off the lower rate card. Why? Because we can do the math, and can see the cost in doing so. Low enough that other factors come in, namely, a freed up card. That card can function as the ...


27

First I must say that I'm not a Ramsey fan. Sometimes loans will make your financial situation significantly better. Especially if its a 0% loan. Generally, I do think that leveraging has its place, its the ab-use of loans what causes problems, not the use. Re your question - you're right in trying to first build up an emergency fund. You should have enough ...


26

If you pay extra now you will pay less in interest over the life of the loan. Unless your savings account has a higher interest rate than the loan's rate you are not saving anything. That being said, you may have a greater need for savings due to other things (e.g. you might need a emergency fund). But if you are only saving for the loan: compare the rates ...


25

Minimizing the interest you pay is ideal, but funneling all money to debt repayment isn't wise unless you have some savings to act as a cushion in case of an emergency. How much money you should reserve in case of emergency is debatable but 6-8 months worth of essential expenses is a common goal. Do some research on emergency funds and evaluate your ...


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