How should I use my extra money?

[kimmywimmy]

Update I paid off the Avant Loan

I have some money that I don’t want to waste so I want to put it towards paying off some of my debts. Should I spend it all on one or spilt the money between them?
Amount Currently Available - $1,080.19

Debts in order of oldest to newest

• Avant (Personal Loan) OG Amount - $3,700
  Remaining Balance Due - $763.78
  Interest - 35.95%
  Monthly Payment - $161.31
• BestBuy Credit Card OG Amount - $2,000
  Remaining Balance Due - $1,282.46
  Interest - 30.49% (M)(V)

Min. Monthly Payment Due - $57
Amount I actually pay Monthly - $173

• CareCredit OG Amount - $1,500
  Remaining Balance Due - $1,391.74
  Interest - 29.99%
  Monthly Payment - $43

$1,204.17 - No Interest If Paid in Full by July 26th

Weekly Amount I save to put towards Debt - $80

 

[egg]

@kimmywimmy I'm no financial expert, but I'd recommend wiping out that Avant loan... 36% interest is nuts, you want to kill that asap. The remaining ~$300 I would throw at the next highest interest debt along with whatever you regularly pay on it monthly.

Now that the Avant loan is paid off completely, you can start rolling what you were paying them into the next highest interest debt. Knock that sucker out and keep repeating the process until your debt free.

Edit to add: If you make the minimum monthly payments on that purchase with 0% interest before July, will that be paid off? Or would you have to make more than the minimum payment? If it's the former, then I'd just make sure to pay that every month, if it's the latter then make sure you are on track to pay it off by July or the interest could balloon (I think that's the term?) Basically, interest doesn't start accruing from the date in July, it's been accruing all along but you aren't being made to pay it unless you don't pay it off in time at which point you'll be hit with 6 months (or however many interest free months the loan was for) of accrued interest all at once. Anyone feel free to correct me if I'm talking out my ass, like I said, not an expert.

 

[kimmywimmy]

@egg Thank you! and no making the minimum payments would not be enough to pay it completely off in time

 

[roja]

@kimmywimmy Pay off 1 and use the rest to make a dent in 2.

Find a local bank, or even check for online options, with a good reputation for not screwing over their customers and inquire if you can refinance the rest of 2 and 3 for a better interest rate. 10-15% interest will still be a lot but better than 30% which is downright predatory. Check what terms and conditions apply.

How much do you need to pay per month to have the interest free purchase paid off by the deadline? And what would be the interest percentage after that?

When it is all paid off stop carrying a balance on any card, ever. It will feel so much better when you aren’t juggling payments or spending on interest.

 

[kimmywimmy]

@roja I would need to pay $200 a month, the interest is 29.99% and normally I would agree with you but my CareCredit card is used for my pets in case of an emergency. I had to take both my cat and my dog to an ER vet last month so that’s why it has a balance. I have pet insurance so I at least got some money.

 

[roja]

@kimmywimmy With this calculator and taking $150 off of the interest for the 5 months at 0% for loan 4 you can pay this all off in about 14 months with a total of about $500 in interest.

After seeing the numbers consolidating this all into one loan is maybe not worthwhile since you can pay it off in just a little over one year.

So just knocking them out one by one highest interest rate first is probably your best approach.

I understand that unforeseen circumstances and costs happen, we’ve all been there. To cover this and not have to rely on high interest rate credit cards when it does the general recommendation is to build up an emergency fund with 3-6 months of living expenses. After knocking out the debts you could start working towards that.

A great resource for what you might do after that is ‘the simple path to wealth’ by JL Collins which he originally wrote for his own daughter to give her advice on her personal finances.

 

[kimmywimmy]

@roja I would like to build up an emergency fund the problem is emergencies happen randomly and without warning. I had to spend all my savings on their medical emergencies vet bills and I still had to use the CareCredit card to cover everything. I plan on saving a good amount of money but things go wrong when you least expect it and it can empty out all your savings to take care of it.

 

[roja]

@kimmywimmy Yeah, it can be tough. And things always happen at the same time.

 

[golgothaghostwriter]

@kimmywimmy Pay off the debt starting with the highest interest rate and work your way down. Don’t wait until you have the full amount to pay it off; chip in whatever extra principal you can whenever you can. Have you changed whatever habits or situations led you to get this kind of debt to begin with? I almost threw up when I saw your interest rates.

 

[kimmywimmy]

@golgothaghostwriter Yes I’ve changed how I handle my finances. I took a couple basic level financial lessons that have helped me. And the one hurting me the most is the BestBuy. I paid $173 last month and they took around $40 in interest. I’m also adding more money to the monthly payments too. I’m still saving and paying extra I just don’t know what to do with the extra money I currently have

 

[naturewalk]

@kimmywimmy Each dollar of Avant debt is hurting you more than each dollar of Best Buy debt.

You have more debt with Best Buy overall, but when you're paying off debt, each dollar you use to pay off the 36% debt helps you more.

 

[kimmywimmy]

@naturewalk Thank you! Since it’s a set payment amount each month and it’s not a revolving credit (I think that’s what it’s called?) I never really thought about how much extra it’s costing me but that makes sense. I still have a lot to learn but I definitely learned my lesson from this loan.

 

[larryn]

@kimmywimmy Initially the Best Buy seemed to be the worse of the two, however upon running the numbers what the people before me have mentioned is right on the money; and you’re going to want to knock that Avant out because in the long run it will be doing more damage to you.

 

[naturewalk]

@kimmywimmy One way to visualize the debt is to think about it like a video game.

The dollar amount of the debt is like the hit points of an enemy character. The APR is how quickly an enemy character can deal damage to you. Oh, and all enemy attacks are vampiric, so they heal themselves whenever they damage you.

The Best Buy card has the most hit points, so maybe it's a heavily armored knight.

The Avant debt has fewer hit points, but deals a lot of damage, so maybe it's a lightly armored assassin using poisoned weapons.

It would be a bad tactic to trade blows with the tank while letting the assassin backstab you, right? You should kill the weaker but deadlier assassin first, then deal with the knight once the assassin is dead.

 

[brock]

@kimmywimmy That’s the highest interest I’ve ever seen. My mortgage and two cars are 2.125%, 2.55%, and 3.00%. I think I’d drop dead before paying 35%.