luvmylittleboy2003
DIS Veteran
- Joined
- Apr 9, 2007
Do you start with lowest balance or highest interest rate? I've read different things
There are two schools of thought on this.Do you start with lowest balance or highest interest rate? I've read different things
One is to start with smallest debts and concentrate on knocking that one off. Once that is paid off, you take the money that you were paying on it and add it to the minimum payment you were making on the second-lowest payment. And you keep that up until they are all paid off. It can be inspiring to be able to cross them off one by one. This can be especially motivating in the beginning.
The only debts we had when we started a DR type program were student loans and a car. Both were about the same amount of $$ owed and both were pretty low interest. So, there were no real decisions that needed to be made about it.
Dawn
I've ran the numbers and at the the current interest rate I'm basically a dog chasing it's tail . I called a local credit union who said I could get a 3 year loan for the amount needed at 9.99% interest, but, will have to use my car as collateral, but this still makes more sense to me than paying higher payments/interest on credit cards, which will take me longer than 3 years to payoff due to the crazy interest rates..thoughts?
The part in bold kind of jumped out at me. If you're serious about paying down your debt, you will not "free up additional cash flow". You still have the same income, so the only thing that will change is the interest that you will be paying on the loan. To really pay down that debt quickly, you should continue to pay whatever amount you have been paying on all of your debts but it will only be the one payment (the consolidation loan) instead of several separate payments to the various creditors. IOW, that "lower monthly payment" is deceiving.Based on my all of my info..income, debt, interest rates, etc..I feel it makes more sense to do the loan with the bank. The payments will be a little bit lower so it will free up some additional cash flow and instead of 12, 18, 21 and 24% variable rates it will be locked at 9.99%for 3 years.
I do need to ask how it works if the car is totaled, etc, good point!
As far as getting in this mess again..going to a "if it's not there, it doesn't get bought" which basically is where I'm at now.
Also, paying the highest interest rate doesn't ALWAYS save money. If you can pay off a smaller debt in a few months, often adding that snowball money actually pays off the higher rate quicker. So make sure you crunch your numbers if you deviate.