Question

What would yall do?  Today I am able to pay off one of the two debts below.What would yall do? Today I am able to pay off one of the two debts below. The top one has about $165 a month payment and is 20%. The 2nd one is $475 a month but 15% interest. I am leaning towards paying the 2nd and having that 475 extra to use to pay off the high interest one sooner! Yall I'm beginning to see a light at the end of the tunnel and the weight of debt is getting lighter and lighter!  

Answer 1

Pay off the higher interest one. The amount of the payment is irrelevant. If you could pay off either one, then you have at least $6k right now to pay towards debt. Pay off the $5700 with higher interest and $300 to the $6k. That brings the $6k to $5700 (same balance left to pay as if you paid off the $6k), but you're paying a lower interest rate. Either way, you're going to have the same $640 to pay towards either account, but because you're paying 5% less interest, you're going to be done sooner than if you do it the other way to "free up" the higher payment. which is going to work the same either way. There is literally NO BENEFIT to "freeing up" the higher payment if you're going to just snowball it anyway - you're costing yourself more in interest. You'll be done faster (or, same amount of time, but less money) if you pay off the higher interest one first, than if you do it the way you're thinking.  

Answer 2

Yes, definitely! Pay the 2nd and then snowball!  

Answer 3

I would pay off the 20% interest debt!  

Answer 4

I’d pay the second then you can pay off the other one quickly!  

Answer 5

I would use an online debt calculator to see which way would save you more interest wise.  

Answer 6

Normally I would say the lower one first but I think it would be better to pay the $6000 one first because they are so close in amounts and the second payment on the first would pay off SO much faster

Answer 7

Yeah I would definitely free up the 475 and then pay the other one off ASAP

Answer 8

Definitely the second one! It frees up way more cash to put towards the other debt.  

Answer 9

2nd one because then when you pay on the other one snowball it and you’ll be paying a little over 3 1/2 months worth of minimums in one month

Answer 10

I would vote the bottom one. That larger shovel will knock out the top one so much faster!  

Answer 11

Second one definitely!  

Answer 12

Pay the one with the higher interest rate. You said that’s the credit card, right? Your score will drop when you pay off the loan, but it will rebound.  

Answer 13

Def second one that $475 extra will whop out the first card.  

Answer 14

The second one first for sure

Answer 15

2nd for sure

Answer 16

I'd pay off the one that frees up the most money. The extra $475 a month would be a awesome snowball

Answer 17

The second one. It will free up a significant amount of monthly cash flow

Answer 18

The second one.  

Answer 19

Second one and throw that amount at the 1st from now on!  

Answer 20

The balances are so close, I’d pay #2 and snowball that $475 into #1

Answer 21

I always pay what freed up most $ monthly and snowball it.  

Answer 22

I would pay off the 20% interest first.  

Answer 23

I say do exactly what you were thinking of doing. At least that is what I would do.  

Answer 24

I would normally say pay off higher interest but your plan makes a lot of sense given how close in amounts they are and how much that frees up for you! If u want to check the numbers you could input them into undebt. it for free and run both options easily

Answer 25

Clear out the 475 payment. Then you can snowball the other debt

Answer 26

Second one

Answer 27

Second one makes more sense to me  

Answer 28

Pay the second one first and than use the monthly payment to pay off the other one.  

Answer 29

The second and then snowball the other! Awesome job!  

Answer 30

I would pay off the high interest and here is why. No matter what your payment on the 2nd one will be $640 if you snowball the ENTIRE freed up amount. The $5712 will take you 10 months to pay off and you will pay $524 in interest. The $6039 will take you 11 months to pay off but you will only pay $427 in interest. It will take you 1 month longer to pay and you will save $100. Not that much but my reason is different. If you free up $427 from the lower interest card you will be so tempted to borrow from that amount to pay for other things. It’s a mental thing that you freed up so much money it might be ok if you sent some of the money to the other debt and use the rest.  

Comments

Almost this, but you have to account for the extra $300 from the one-time payment against the $6k one (assuming the one-time payment available is $6k, which you'd have to assume if the $6k can be paid in full). It ends up being 10 months either way, and I think the interest difference is a little over $200.  

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And that mental point is SOOOO true. It's easier to get off track if you have MORE available money than if you have less available money

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Definitely. If you pay the $300 to the $6000 one now you will save even more money by paying the higher interest rate one first. The bigger one would be paid off in 10 months with only $383 paid in interest.  

Answer 31

You ladies are always such a huge help!  

Answer 32

Go you!  

Answer 33

Second one for sure

Answer 34

The larger interest! You're paying more to carry that debt

Answer 35

I’d pay the platinum card and throw the difference at the installment loan

Answer 36

Yep, I'm with the majority - #2!  

Answer 37

Second, for sure!  

Answer 38

Second one! Free up that chunk of $$ and go after the first one.  

Answer 39

2nd and use that $$ to tackle the first!  

Answer 40

If the 2nd will increase due to interest compounding then I would pay that first. But if it is fixed I would pay the first one off.  

Answer 41

Swcond and put that payment on the forst one it will be paid off in no time

Answer 42

I'd pay the one with higher interest because youd save money that way.  

Answer 43

The second one. Then pay $640/month to pay off the first one. Freeing up $165 vs $475 is a no brainer when the interest rate difference is only 5%.  

Answer 44

2nd - and since you’re freeing up some extra $$, may a little more on the 1st one each month!  

Answer 45

Right now, given the economy and the uncertainty of our salaries, I would pay off the one that frees up the most money for you per monthly payment.  

Answer 46

Go to  
https://undebt.it/

Answer 47

Your plan is a good one

Answer 48

Get rid of the massive monthly minimum

Answer 49

I would totally go with the one with the higher payment then you can put that plus the 165 toward the other and have it payed off in no time.  

Answer 50

High interest. Look at how much of your payment goes to the interest. You're paying a low payment, but it's essentially throwing money away because it's not really affecting your balance.  

Answer 51

As long as you have your emergency fund fully funded, I would go with the higher payment and use that money in the following months to pay off the lower one also.  

Answer 52

I would pay the 2nd one and free up $475. Then use the $475 & $165 next month to pay the 1st bill with. You will see a quicker decrease in the balance on the platinum card once you can pay more.  

Answer 53

The one with the higher dollar payment. I did the same with a 0% interest and have been snowballing. Next month I’m going by Undebt. it order to pay off quickest.