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Thanks all for the replies on the other topic, yall have been a big help. I just found out today that im getting $5000 dollars next week from an insurance claim. Now i need yall's expert advice on which one i should pay off first. I just want to make sure i dont spend it on the wrong credit card. Here are the cards i owe on:
1)Visa balance- $9000 int rate- 16.9%
2)Visa balance $7500 int rate 12.9%
2)Discover $8500 int rate 9.9%
2)Mastercard $2400 int rate 19.9%
3)Mastercard $2600 int rate 17.9%

My only problem is id like to pay off the highest interest rate first, which also happens to be the biggest balance- but there is one problem.
Visa #1 w/ the $9k dollar balance, is a fixed payment loan i got. No matter how much i pay down toward the principal, the payment will remain $260 a month until its payed off. So if i put 5k toward that one, my payments will still be the same. So which card should i put the $5k toward? OR should i put it toward trading my car in? My car payment with insurance is $1093 a month and my car is only worth $33k for trade in. I owe $39k on it. Should i try and scrape up another grand and sell it back to the dealership or an individual or put the $5k toward a credit card balance? thanks all for the help....
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There are a couple general rules here. As it happens, in this case they produce the same answer, but I'll walk through them anyway.

Question: do you typically have a cash flow problem? Is there usually too much month left at the end of your money? If so, but at the moment you have a bit of cash (e.g. a tax refund check), then you typically want to pay down/off the debt that has the fewest monthly payments left (to provide you with some cash flow relief ASAP). Quite a lot of the time (but not always), this is the debt with the smallest balance. Which in your case is the MasterCard $2400 at 19.9%.

Otherwise, you typically want to pay off the card with the highest interest rate first. In your case, that's the MasterCard $2400 at 19.9%. Every extra $10 you pay on this debt will save you $1.99 in interest in the course of one year - you're that much closer to killing the beast. None of the other debts gets you the same return.

For general guidance, you should look for a Snowball Calculator. The link has been posted here in the credit card board in the last few days, and is also frequently mentioned in the Living Below Your Means board. Alternatively the same feature is present in both Microsoft Money and Quicken 2001 - in the latter it's called a "Debt Reduction Planner" and is in the Planning menu.
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I agree with the other poster about cash flow. Assuming that isn't a problem.

Also, reducing debt is reducing debt. You save money no matter what because you aren't paying interest. There is a point where you save more, but it still means no more interest.

I see paying off the two Mastercards as an option. You wipe out debt with high interest rates. this also frees up the money you spend there to go to other places. Even if you've been only paying the minimums, you still get to send that money towards the other cards. The visa with 12.9% would get extra money. That would help you chip that one down that much faster.

Trading in the car? I will ask you if this is the car. Do you truly love it? If you truly love it, maybe you can hang. If it is simply a way to get places, you can get a cheaper car no problem. You could sell it to someone else, not the dealer, they might pay more.

This is a plus, don't get too worked up about it. Look at the options and make a good decision.

Fredinseoul

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Please note: It's 12:41 am and I'm kind of a straight shooter with opinions so if any of this seems harsh, I apologize. Just tellin it to ya straight.....


My advice is
1) Payoff the Mastercards. They have the highest interest rates and that will get you the most bang for your buck.
2) Find out why you have 5 credit cards with balances. Doesn't take a genius....you've spent more than you made. Analyze what you've been spending your money on and make sure your budget (if you have one, if not, get crackin) accounts for everything you spend money on. If it doesn't you will just wind up in the same mess in a few years. You need to ensure nothing else is going on cards.
3) Get a different car. I don't entirely agree with the person who said keep it if you love it. It's a car! You know, a piece of machinery that loses its value the second you drive it off the lot and takes you from place a to place b? I can't even think of what kind of car you must have that it cost that much. It's either a monster SUV, in which case it's eating up expensive gas, or its a luxury car and you can't afford luxury anything when you're in debt with 5 credit cards.
If you can, sell it back without major penalty, or trade it in for something more affordable and knock down those credit cards ASAP.

Also I would relook at that weird Visa with fixed payments thing. Does it have a pre-payment penalty written in the contract somewhere? There are not that many loans these days that you can't prepay and get rid of unless there's a clause in there against pre-payment. Re-read the terms.

That's my more than 2 cents. Let us know how it goes!

Oh, one more thing. I'm really into the emergency fund kick so I would actually pay off $4K and stash $1K into a money market or savings account so that if anything unexpected comes up (and it will) you won't need to keep charging stuff.

Good luck,
Karen
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I agree with Karen about the car. $1100 a month on a car payment is high. You can get out of the high car payment without taking a huge bath. But if you went this route, I would suggest a more affordable car where you can get the monthly payment down to around $300 or so. Even if you had a $400 dollar car payment plus $100 in insurance, you would have an extra $600 per month to snowball the other cards with. This may actually be better in the long run.
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Karen:

I agree with you. Build a small emergency fund and pay off the mc.

Catleen
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I'm in the "say goodbye to the caddy camp". When you sell the muscle car, buy a more affordable used car and then pay down some cc debt.
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Thanks all for the replies on the other topic, yall have been a big help. I just found out today that im getting $5000 dollars next week from an insurance claim. Now i need yall's expert advice on which one i should pay off first. I just want to make sure i dont spend it on the wrong credit card. Here are the cards i owe on:
1)Visa balance- $9000 int rate- 16.9%
2)Visa balance $7500 int rate 12.9%
2)Discover $8500 int rate 9.9%
2)Mastercard $2400 int rate 19.9%
3)Mastercard $2600 int rate 17.9%


If you're getting $5,000, pay off the two MasterCard balances. They are the highest rates and you can clear them out entirely. Then take the payment you were making on those two cards and add that amount, plus any additional money you can pull together, to the payment for Visa#1 until you pay it off. Roll the full payment you'd been making on Visa#1 towards Visa#2, and finally the Discover card. You are "snowballing" the payments to pay off the balances as quickly as possible. Note that any extra money is applied to the card you are focusing on, don't split the money between cards -- the others just get minimums.

That's the approach to take if you want to pay of the credit cards first.

Regarding the car, if you trade it in (I think you're implying trading down to a less expensive car?), you'll be back in the same boat of being upside-down on the loan almost as soon as you get the new car. Since you'd be taking the entire $5000 lump sum plus additional money to get out the existing car, you'd presumably not have additional cash reserves to buy a used car for cash, so you'd be taking out a loan again. Now, if you had another $5-6k laying around, that's a good approach (sell the current car, pay off the loan, buy a reliable used car with the remaining $4-5k, then apply the $1093 former car payment to the credit card "snowball" described above).

Hope this helps.
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A little personal advice if I may runninhorn,

I've had a pretty long business career beginning in banking and then on to other areas.
You mentioned Sunday that you want to sell cars. If you do so, of course you know it's a commission job. People that make a living on commission sales need to be very caeful about there debt loads. You never know when the economy will turn down in your area and your sales go down as well.
As a banker, I noticed that car salemen {I'm old. When I was in banking I never met a female auto saleswoman} and insurance agents would be the worse as far as doing well for a couple of years and using those w-2's to qualify for way too much money.
I've a 2nd cousin in that shape now. He is a Nissan saleman and has done well for several years. Two years ago, he sold a house that was paid for and borrowed $125k to have a dreamhome custom built. Today, that house is for sale, the kids are getting school clothes at Wal-Mart,etc. His wife told my mother that no one would believe the cc debt.
You can make a handsome living in sales if you have the right attitude and work ethic but, take special care with your personal finances. The bills are still there whether you have a good month or a bad month.
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I agree with Karen and all others who suggested pay off those 2 master cards with the 5,000 - that's what I would do. I'd also get rid of the car with the high car payment for sure - get something cheaper, better on gas like a Chevy Cavalier or something like that! Then I would snowball each acct like the previous poster mentioned! Take the one with the highest interest rate first of all, and then get that puppy paid off, then on to the next one, etc! You save on your interest payment that way by attacking the card with the highest interest amount!
Allison
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I have a personal rule about financing large ticket items such as cars, motorcycles, Sea-Doos, etc.

I do a bit of research on resale prices of similar used models at least as old as the number of years I might be financing for.

I roughly graph what my payoff balance would be over the same time frame.

I determine if I can make the purchase in such a way as to never become "upside-down" on my loan. I can sell any of my vehicles in a week and get at least enough to pay off the loan, if not more, in case I get fired or some other emergency comes along. I either put enough down payment, or get a good enough deal so that this is the case. If I can't get this rule to work, then I won't buy the thing, period.

In fact, I overestimate the depreciation to give myself room for error.

xtn


Oh yeah... pay of the two master cards.
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1)Visa balance- $9000 int rate- 16.9%
2)Visa balance $7500 int rate 12.9%
2)Discover $8500 int rate 9.9%
2)Mastercard $2400 int rate 19.9%
3)Mastercard $2600 int rate 17.9%


It looks like the 2 MasterCards are perfect targets to be paid off with the $5000 you're getting from the insurance claim. $2400 + $2600 equals $5000 exactly. Actually, I'd call them and get payoff figures, or even guesstimate your interest charges for this month to pay these cards completely off.

With these two cards paid off, then start to work on the others, using the snowball method. Even if the $9000 card will always have a minimum due of $260, the interest surely is calculated on your Average Daily Balance, so paying it off quicker will result in lower interest paid by you. AAMOF, if you can send them at least $260 twice a month, why not start making two payments a month?

- Lan
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I vote to pay the Mastercard 2600 & 2400 (total 5000). However, you should use the money you would normally send them to pay the 7500 Visa, then hit the 9000 Visa then Discover. Keep the car if you like it. Life is too short not to enjoy something!
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