debt of $15,000. should I opt for a consolidation/personal loan OR follow what Dave Ramsey says by paying off one credit card at a time from the least amount to the largest? my biggest concern is the finance charges. HELP!
2007-04-07 11:42:11 · 6 answers · asked by joice 2 in Business & Finance ➔ Credit
As Dave would tell you himself, personal finance is 80% BEHAVIOR and 20% math. Paying high rate cards first makes sense mathematically, but the psychological benefit of paying of smaller balances first will motivate you to stick with the plan. That outweighs the mathematical advantage of the other approach.
2007-04-07 13:17:06 · answer #1 · answered by STEVEN F 7 · 1⤊ 0⤋
I personally think $1000 is a tiny amount as well. If something goes wrong and you have an emergency of $2000, will your parents help you out on the additional money? However, how you decide if that's enough has nothing to do with whether or not you can pay off your debts entirely or not. (Let's say you could. The only difference is that you would no longer be making payments and could add to the emergency fund instead.) Dave's babystep #3 is the 3-6 months of expenses in savings. If you reverse babystep #2 and #3, you will probably never get out of debt. At best, consider this 1/2 of your debt and apply 1/2 of any available money to the debt and 1/2 to the savings.
2016-04-01 02:43:02 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Do the Ramsey plan. We have been using it for the last 1 1/2 and we have paid off over 15K in debt! We have tackled the smallest and going to the highest. We used last years tax refund then "found" money we started budgeting every month! Now we are working on a garage sale and selling stuff.
I agree with the others, don't do the consolidation loan because you need to change your behavior. After working Dave's program for a year we decided move a high interest (23.99%) unsecured loan to our credit union (10.99%) but our behavior has already changed now it is just nice seeing so much more going on the principle.
Before starting Dave's program we did debt consolidation and we just got more in debt because we didn't stop using the credit cards! Now we have and making headway!
2007-04-09 02:12:08 · answer #3 · answered by mldjay 5 · 1⤊ 0⤋
I have read Dave Ramseys book and I found it to be amazing!
Personally, I would take the "Dave" approach. Pay your minimums on your other cards, while focusing on one particular card. Even if you send an extra $10-25 a month, it helps! Once you get the lowest interest rate card paid down to a zero balance, apply that payment to the next card.
There are some that do not agree with this plan, but it works! When you are in debt, it is an amazing feeling to wipe one card out at a time.
2007-04-07 11:49:50 · answer #4 · answered by Sophia 3 · 3⤊ 1⤋
We have been using Dave's plan for about 3 yrs & IT WORKS! Nevermind interest rates, they are NOT your problem. The problem is that you ahve spent more than you have made. It doesn't matter where the debt is or what you spent it one. All that matters is that you get deadly serious about paying it off uber-fast. Dave says to pay the smallest balance off first because it MOTIVATES you to kill the next one on your list. (It works the same way as losing weight on the 1st week of a diet.) Posting it on the fridge or your bathroom mirror is serious motivation, especially after you start paying them off. DO NOT consolidate, just move them to some 'low introductory rate' cards, if you are hell-bent on 'doing something' about the finance charges. In the meantime, start selling stuff on ebay, have a yard sale, get a 2nd job, start living on a budget, stop buying lattes or eating out & burn those freaking credit cards. IF you are serious about getting out of debt, you will go to these extreme measures. It is all about making getting out of debt quickly the focus of your life for a very short time.
If you need more motivation/explanation, tune into his podcasts (live or archives). I listen to them regularly...keeps me focused.
2007-04-07 12:28:36 · answer #5 · answered by Tom's Mom 4 · 4⤊ 1⤋
Always put the most you can on the Credit Card with the highest interest rate.
As for consolidation loans you have to be very careful. A lot of people fall into the trap of getting a consolidation loan to pay off the credit cards. However, they go right back to their old habbits and charge up the credit cards again. So not only do they still have the credit card debt to pay they have the consolidation loan from when they paid them off.
If you can get a consolidation loan for a lower interest rate, and can have self control over your credit that is a good thing to go for. If you can't then avoid them and just focus on paying down the cards.
2007-04-07 11:50:38 · answer #6 · answered by OC1999 7 · 3⤊ 6⤋