I'm really embarrassed to tell you all how much we owe to debt but I'm going to humble myself because I need your advice! I need to know which option do you think would be the wiser for us to do, in getting a bit ahead of our debts? I'll explain our situation a bit to you.

In august, I will be working with my hubby on a fishing lease and hopefully we should be selling quite a bit of shellfish and will be able to have a nice lump sum of money saved up...not sure exactly how much yet though.

O.k , we have a personal loan of $10,451.05 with an interest rate is 9.0%. We pay $83.98 a month interest and $31.95 for insurance. The total monthly payment is $651.29. Also on one CC we owe $7528.00 with an interest rate of 4.9%. Monthly interest of $34.35, monthly payment comes to $195.00 (it goes down, obviously as we pay on it). Then we have another CC with a balance of $4969.87, interest rate of 9.0%, interest payment of $29.65, monthly payment of $122.00 (going lower as we pay it). How humilitating to tell you all that!! We are very ashamed of the mess we have gotten ourselves into but we are trying very hard to change the situation!

We are hoping and praying to have $10,000.00 to pay on something by september...like I said hoping and praying ray: !! I really hope that is not just wishful thinking on our part! We thought we would bank all the extra money for the month of august and then decide which option to choose and pay a lump sum on something. Which option do you think we should choose?

#1. Should we pay off the loan...thus getting rid of the $651.29 monthly payment, giving us more income to pay on other debts
#2. Split the $10,000.00 between the two credit cards, which would leave us still owing about $2, 497.87 on the CC plus still owe the loan.
#3. Some other wonderful option we haven't thought of !!

I should also mention that our income drops signigicantly starting in December. It is seasonal work so we would be drawing unemployment in the winter months till may 1st so we won't have any extra money to pay on debt then. We do good to pay the minimum payments in the winter months.

So ladies....got any advice??

In general, pay off the highest interest loans first. It sounds like paying off the personal loan might be the best option. The reason I said that over paying off the CC with the same rate is that this gives you more flexibility in how much to pay on the remaining balances on the two CCs each month. I would pay off your CC with the 4.9 rate LAST.

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I just watched an excellent show last night on MSN. It was called The Millionaire Inside. Try and catch it if you can. I believe it will a weekly thing on Saturday nights? They had all the top BIG financial people on there giving advice.

Anyways, they talked ALOT about credit cards and the biggest thing they stressed is to pay the credit card with the lowest amount owed first (NOT the highest interest rate) Then, the money you WERE paying, roll that into the NEXT lowest credit card. They said to make a list and hang it on your fridge of all your credit cards/balances and just work on each one. So, for example your list should look like this:

1) Credit Card- $4,969.87........payment $122.00

2) Credit Card- $7,528.00........payment $195.00 (once you pay off the #1 cc- this payment will go up to $317.00 until you pay it off)

3) Personal Loan- $10,451.05..payment $651.29 ( once you pay off #2 cc- this payment would go up to $968.29)

Don't beat yourself up about this too much....just make an honest effort to change things. They stressed to cut out all the extras..no eating out, no coffee on the go, no manicures. Track your spending and you will be surprised at the unneccessary items you spend it on.

Most people are in debt in some way....you are not alone. I just worry that the $10,000.00 you are "banking" on will fall through. It never fails for us. When we count on something, it never seems to happen. Plus, is it a lump sum of $10,000.00 or will taxes and such be taken out? Usually around 30% is taken. This will effect your plan of attack as well.

If this were me...I would pay off the lowest card first, pay off as much of the second card as possible, then roll over the $122.00 you were paying for CC#1 onto the balance of CC#2 making that monthly payment be $317.00. Hit that CC as hard as you can until you all go on unemployment. The hard part is not to treat that "freed" up cash as "extra" money and spend it elsewhere. You have to be serious about paying down your debt and it WILL happen. You can do it!

I am sorry this was so long. I hope I helped a little. Just don't beat yourself up too much about this. You are taking a big step in admitting what you have done and holding yourself accountable. Good luck!

This is called the snowball method. Pick up a copy of Dave Ramseys "Total money makeover". Check it out from the library or can buy it for about $20.

He recommends that you build up a $1,000 Emergency fund first, that will cover emergencies, not to be used for "emergency" take out pizza, but if your car breaks, etc. Then pay off your lowest balance, and repeat until all debt is gone.

Good luck

Good for you for trying to become debt free. Just remember that you didn't accumulate the debt over night, so it's not going to go away over night. Hang in there.
I didn't see the show sahmof3 mentioned, but that's the advice I've heard countless other places.
Good luck.

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~Jeweled

We've been there! We also used the snowball method and it is working great for us. It feels like you are actually getting things paid off. We started with our smallest debt and worked up. We started with 2 personal loans and 3 credit cards. We are now down to just one credit card. After that, we will pay off my school loan, then work on our car loan. Good luck and don't feel bad. Just live and learn!

I would pay off the loan first so that you free up the money you were paying on the loan and then can apply it to one of your credit cards. I'd definitely pay OFF something so you can have that extra money to apply to the remaining debt. I don't think you should split it between two credit cards b/c you'll still have both payments you have to make. Also, if you don't pay off the loan, maybe you should get rid of the insurance and so that that amount goes towards the loan. In general, I think insurance on loans is a bad idea and just a money maker for the company.

Debt snowball and here is a calculator if the link works that calculates what debt you should pay first Snowball debt calculator - Become debt free at WhatsTheCost.com

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Kimberly Proud Mommy to Bethany Rose April 2006

I have heard a lot about paying the smallest debt off first and the snowball method. That has been the approach we were working on because it would be more encouraging for us to see a debt get wiped out, but we just wondered if it made more sense to pay the loan off because it would free up more money monthly. If we cleared up the credit cards we would have an extra $317.00 per month to pay on the loan but if we paid the loan, we would have the $651.29 extra...over twice as much. If we can make the whole $10,451.05 that seems like it would be the best approach. If we can't save the total amount of the loan then I don't think it would make sense paying on it because unless we re-financed it, the payment would remain the same (is this right??). So we would end up still paying the $6oo monthly payment plus the CC payments.

Personally I would pay off the loan - it freezes up a lot more money a month that you can then apply to your other cards. I would then switch the remaining cards owed onto a 0% credit card - you wont be paying interest and the principal will go down a lot quicker. Come the winter months, if you dont have that extra $651 you were putting towards the loan to put towards the cc's, at least the monthly payments on the cc's are less combined than the one loan - to me that makes more sense. JMO