Which debt should I pay off first?

Question

Hi! I have a sudden windfall of about $8000. I want to use the money to pay off some debt, but am confused in which order. Here is the laundry list:

1) CC #1: $5000; 3.99% interest (it's low b/c I transferred)
2) CC #2: $2000; 15% interest
3) Student Loan: $10,000: 10% interest (variable)

I was thinking of paying off my two cc's in total, and using the remaining $1000 towards the student loan. I know the conventional advice would be to pay off the highest interest loan first (student loan), but I am hesitant b/c a) paying off my ccs in full will boost up my credit score more; b) the psychological bonus of paying two items in total; c) I couldn't pay off the student loan in total anyway w/$8000.

Advice is appreciated!

Answer 1

I would pay off the credit cards first, and put the rest towards the student loan. I think I would benefit most from the psychological THRILL of eliminating 2 of 3 payments. Besides, the 3.99% interest rate may increase after an introductory period. I also think that I'd be more motivated to pay extra (beyond the minimum payment) on the student loan if the other two bills were out of the way. Either way, it must feel AWESOME to get rid of that debt! What a blessing! Keep up the level-headed thinking. ;)

Answer 2

I understand the psychological about paying off those credit cards in full. But since one of the cc only has 3.99% which is a very good low rate. You really should pay off the credit card with 15% interest and majority part of the student loan. Even the student loan is a variable rate, and even IF there is trend of the interests going down, it not going down as low as 3.99%. So go with your first instint and pay off the highest interest rates. And do still focus on the student loan over the 3.99% credit card after the $8,000 payments.

Answer 3

I would pay off the cc's first as the student loan can be taken care of over time and if you go back to school for any reason can be postponed. Not that I'm recommending you post pone paying it but you get what I mean. Also I have been told by a friend who is a loan officer that student loan payments don't reflect positively on you credit report if paid on time, only negative if not paid. So paying it off sooner won't help your credit, it will just be paid off.

Answer 4

3 - 2 then 1

Answer 5

Pay off the credit cards. It will have a positive impact on your credit score. Make sure that you don't run up those credit card balances again. Only charge what you can afford to pay in full at the end of each month.

Take what you had been paying towards those credit cards and add that to your student loan payments. That will get those paid off faster.

Answer 6

You should always pay off the debt with the highest rate first. Pay $2,000.00 to pay off the 15% card.
Pay $6,000.00 towards the 10% student loan.
Once you pay off the 15% card, the credit card comapny will probably send you a balance transfer offer or checks at a very low interest rate. If they send you very low interest rate checks for the life of the balance I would use the checks to pay $2,000.00 toward the student loan.

Answer 7

Maybe you could pay $4,000 on your student loan, then the $2,000 credit card and $2000 on the low interest card. Just an idea, then your high interest card would be paid off and you would have a significantly lower balance on your student loan and the other card has really low interest so if you make double payments the rest of the time it will get paid off sooner. But I'm no expert.

Answer 8

i'm sorry to assert, yet he's astounding and right this is why : Having debt is a genuine turn away to purchase a house plenty extra then the upside of having mark downs (have confidence me, i'm in the attitude of identifying to purchase for a house). without costs, banks would be extra keen to offer you a huge mortgage because of the fact in the top, they substract the quantity of debt you have of the non-public loan or something like that - huge turn away. additionally, till your money is properly placed, you particularly make a penny on a a hundred$ sitting in a economic enterprise in keeping with month - on the same time as with debt, the activity fee as you noted can grow to be somewhat severe. this is no longer genuine which you might have debt all your existence and in my journey, you would be plenty extra happy understanding you are able to stay a debt loose existence - something banks or the different loaner will never aid you already know. Debt are a responsability, effective now and returned this is mandatory however the time you are able to spend with no need any is a blessing.

Answer 9

Put one-half of your windfall into a savings account! You never know when you might need it!

Use the remaining $4,000 to pay off the $2,000 loan completely because it has the highest interest rate) and then use the other $2,000 to pay down your student loan.

Answer 10

Pay off your credit cards. Put the remaining $1,000 in the bank for emergencies so you won't have to use your credit cards. Keep paying on your student loan, increase your payments since you will no longer have credit cards to pay.