?? on paying down debt.... About This Page:

[5SOXFNZ]

Ok.....this always confuses me....
What's more important when your figuring out the order to pay off the cards??
APR
highest balance
balance vs. credit limit ratio

I have a couple that are little amounts that I hope to just kill off next month...a couple that are 0% APR that I know I can put off (paying the minimum or a little more of course) it's those middleground ones I can't igure out how to attack!

TIA!

[RoonieRooToo]

When I was killing off all our debt, I made a spreadsheet of the APR and Balance. Then I figured out what was the maximum I could pay each month.

I paid off based on highest APR. When one was knocked out, I rolled that monthly amount I was paying on that one to the next highest APR item.

You want to pay off based on APR to minimize your finance charges. Less to pay off overall if you pay the higher APR items off first!

[rescuesk]

Dave Ramsey's theory is to pay the smaller ones off first, because it makes you feel like you have accompolished something. Then you roll those amounts over into the next bill, and so on, until they are all paid off.

That's kind of what we are doing, with some tweaks. For instance, we owe a little less on one DVC contract then the other. So, according to Dave, that should be the next one I tackle. But in reality, I am going to go for the slightly higher one first. Why? Several reasons: first, the interest rate is higher than the second one. Second, that payment is almost 2 1/2 times what the other payment is monthly, so when that's paid off, it will free up more monthly money to rollover into the next debt. And third, it will be paid in full by 2011 with no intervention from me, and the other will be paid in 2012. If I do it this way, I can have both of them paid off in 2010.

I think whatever makes you feel the most comfortable and gives you the best sense of accompolishment is the best plan!

[Caldercup]

I agree with the pay the smallest balance making you feel better, but I'd totally pay off the ones with the highest interest rates first -- otherwise you'll be paying more in the long run.
Eileen

[5SOXFNZ]

Thanks everyone!

I actually just found a feature through the Quicken software we use where you can put in all the debts, interest rates, minimum payments and what you have been pying and it works out a plan for you and orders the debts accordingly. Actually a pretty cool feature and it helped us figure out a lot!

[saremca]

We did the smallest balance first thing, but the interest rates on each of our debts was pretty comparable. If we'd had a really high rate on one or more I'd probably have paid those off first.

[mom2twingirlies]

Paying off the highest rates first makes financial sense, but if paying off the lower balances means it keeps you on track longer, you will be more likely to stick with it, then I say pay off the smaller ones. If you have a couple that are small enough to pay off in one or two months, I would kill those ones first. For every 1 less payment, is less stress. After that, if all of them are going to take a series of months to pay off, I would attack the highest interest rate first and get rid of it, while still paying the minimum on the others, then when you are ready to attack the mid size rates, the balances will already be smaller.

[mom2twingirlies]

Oh... I forgot. Good luck and stick with it.
We are still paying off ours, but each one paid off feels like weight off our shoulders.

[Joanne929]

I just wanted to say congratulations and keep up the good work!