Tuesday, November 23, 2010

Next Steps

(this is a repeat of a post from the other day.  I started it, and when it published, it published in date order, so it got pushed down.  I would really love some imput on it!!!)

My current snowball is rolling on down the hill, and should be paid off by the end of the year.  This is the last of my student loans that I have with my Dad, and I just want them gone!

So, which debt is next?  Looking at the Credit Card debt, each balance is around the same (give or take).  The interest rates widely vary though.  The car?  Our retirement loan?  Student loan?

Using the Dave method, it would be the next smallest balance.....which would be the retirement loan.  Interest-based.....that would make it CC2.   I have an idea of what I want to do, but I am curious to see if you come up with the same idea, or maybe something I haven't thought of yet.  Let's do a pro/Con list for each.


Pro:  Once paid off, it frees up $358/mo towards other debt or saving for a "new" car for me (mine is 11 yrs old with 144k miles, and while I plan to drive it 'til it dies, at some point it will need to be replaced).

Con:  It is scheduled to be paid off in Dec 2011/Jan 2012 just making the regular payments.  Interest rate is only 5.74%, so we aren't saving a ton there.

Retirement Loan

Pro:  Frees up $210 a month.  Money goes towards retirement, so it can continue to earn interest.  Can either put this money into debt snowball, or re-instate retirement contribution.

Con:  Money was pre-tax, so it isn't really freeing up $210.  

Pro:  This has the highest interest rate (11.99%) of all our loans, therefore we stand to pay the most in interest here.  Paying it off saves on the "wasted" money to the CC company.

Con:  Dunno.


Pro:  Because about half of the balance is at a low (5.99%) interest rate, and the other half is 0% until next Novemeber, most of the payment is going directly to principal.

Con:  Since the rates are so low, the principal really won't gain that much interest if I continue to pay the minimum.

Student Loan #1

Pro:  This represents about 45% of the balance of our debt.  

Con:  This is the lowest interest rate debt.  Right now it is in interest only payments (until next October), so concentrating efforts here may not do much to reduce the overall debt in the next year.

Lending Club

Pro:  A quicker pay down would show investors that we are a "good" risk, and would increase our chances of getting a future loan, if we needed it. (but we plan to NOT need it, unless it is consolidating debt at a great rate with a quick payoff)

Con:  Dunno.

So there we are......what do you think I should do?


  1. I think you should pay down CC2. You can't think of any cons, and it's the debt that is costing you the most in interest. The only other debt that doesn't have a con is the Lending Club, but since you don't plan to use it again, I wouldn't worry about paying it down as quickly as the rest of your debt. Good luck! :)

  2. I would pay the retirement loan first and then move the the credit cards. You have an asset attached to the car and student loan debt can be put on hold if there is a major problem.

  3. if you owe so much can you call them and settle with them? If not, I would pay off the credit cards first. That is what we did.

  4. My vote is for the car payment next. You can free up more money and go right to the next debt after that. Build up momentum.Save for the car later. A car is not an asset.

  5. CC #2 - at nearly 12% it is the most expensive debt you have. The only con I can see is that it will take a while and you may get derailed prior

  6. Interesting how varied the opinions are!!! Like I said, I kind of had an idea of what I was going to do next, but I was curious if others agreed.

    I will let you know!

  7. My vote goes to paying off CC#2 since it has the highest interest rate. You stand to gain the most by getting that card paid off! How much money is being freed up to put towards the next debt? If you can manage $700/month onto CC#2, you'll have it paid off in 16-17 months... just around the time your car loan is also paid off. What a great feeling that would be!!! Good luck with whatever you decide!

  8. I agree with paying the highest interest credit card down to save on interest payments.

    However, are you making regular payments to lending club? Since (I believe) this is where real people loaned you the money, I would also consider paying this down so they can get their money back.

  9. @Makky's Mom - $700 would be a stretch...I will have to look at the numbers.

    @Jenn - Lending Club is an auto debit monthly, so that has it's own "minimum" payment, along with all the rest of the debts. It was a 36 month term, and we are almost 4 months into repayment. When we applied for the loan, it was based on a 3 year term, and the lenders earn interest (around 10%) for their investment.

  10. I'd pay the car off first, especially since it is close to being paid off anyway. That way if it is damaged in a crash or quits working you're not stuck with a loan and buying a new car. The same goes for the 11 year old car; if things went downhill, would you want 2 car payments?

  11. @Anon - good points. The 2 car payment thing has always been an issue (we have never had 2 payments, but not looking to start!) that I have been concerned about.