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Paying off debt

I just wanted a little advice about paying off debt. We have 4-5 credit cards with balances between 1,000-2,000 dollars on them and one large personal loan with a balance of 5800. All of the credit cards have gone to collections and the personal loan we are behind by 1400. This month my husband had a ton of overtime and I was able to save 6000 this month. What is the best way to start paying off this debt? Pay the one big loan and then start on the credit cards, pay the credit cards then the loan, or catch up on the loan and pay off as many credit cards as possible with whats left, or something else?


Asked by Anonymous at 8:12 PM on Jul. 12, 2011 in Money & Work

This question is closed.
Answers (6)
  • Dave Ramsey!! He has awesome advice. he would say to rank them in oder of smallest to largest. Keep paying min. balance on all but on the smallest take every extra dime you can find and put it towards the smallest. When its paid off take the min balance the paid off one and apply it towards the next one on the list and keep throwing every dime at it. When you get to the 3rd one you will have the previous min. balances of the first 2 plus the min. balance of the 3rd one to apply towards it. This is called the debt snowball. It keeps you motivated because you can see your progress.

    Answer by ria7 at 1:47 PM on Jul. 13, 2011

  • always save back some money for emergencies....ALWAYS. I personally would catch up on your loan and then pay off your credit cards, one by one, in full according to what credit cards are accumulating the MOST interest every month. Just make sure they send you a paper saying you've paid them off.

    Answer by BeachyBabe at 8:22 PM on Jul. 12, 2011

  • oh, and I was going to say, if you go the "settlement" route for your credit cards, be aware that the federal government will charge tax on those pay offs, so it will come out of your next tax return!

    Answer by BeachyBabe at 8:24 PM on Jul. 12, 2011

  • start with the one with the highest interest rate

    Answer by rkoloms at 4:54 AM on Jul. 13, 2011

  • Get up to date on the personal loan. Then look at the accounts that have gone to collection. See if you can work out a deal to pay some on all of those and then stay current. This will kill your credit score if you do not work with these companies. Most times it can all be worked out if you show sincere intent. GL

    Answer by whitepeppers at 9:18 AM on Jul. 13, 2011

  • visit this site and see how they do it.

    Answer by RMott at 11:17 AM on Jul. 13, 2011