High Speed Debt Elimination
Over the past couple of years, I have been on a mission to eliminate all non-income producing debt from my life (besides mortgage). When I first started this mission, I had not only a ton of credit card debt but also a decent amount of installment debt. This mix made it difficult to figure out which debt I should pay off first.
To come up with an answer, I first looked at the most important factors in deciding which debt payoff would be most beneficial:
Rate
This is one of the obvious factors. If you have a credit card at 14.99% and another at 9.99%, you should pay the higher rate down first. This minimizes the amount of debt you will pay in the long run.
It is a bit more complicated to compare the rate of credit card debt to installment debt, because the overall effect of paying them down is not the same. The impact of a payment to the interest that is accrued is similar with each type of debt (all else being equal), but the amount of the next payment will be lowered on the credit card and not the installment debt. This leads me to the next factor
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100th Edition of the Carnival of Debt Reduction said
am August 13 2007 @ 6:32 am
[...] FinanicialDominance writes about High Speed Debt Elimination. [...]
Carnivals This Week - FinancialDominance.com said
am August 14 2007 @ 10:05 pm
[...] My contribution to the Carnival of Debt Reduction was my article High Speed Debt Elimination. [...]
Erin said
am August 15 2007 @ 7:04 pm
We are paying off our debts smallest to largest first, but they just so happen to be in the order of largest APR to lowest APR that way too. Our interest rates are pretty low, but if I was one of those who had a crazy 30% interest rate on a high debt I’d want to get that out of the way first no matter what.
Living Behind The Curve » Yep, We’re Bums said
am August 20 2007 @ 10:46 am
[...] Time | All You Need is Love…and a Good Financial Plan: 17 Finance Tips from the Beatles | High-Speed Debt Elimination | Blogging About Personal Finance Changes the Way we Think and Use Money | ~~ | Subscribe via RSS [...]
Debt Relief said
am September 24 2008 @ 12:19 pm
Marcel,
was this article cut off? Anyways, good tip. One major factor is looking at the interest rates. Most don’t know this but you can call your CC company and ask for a lower interest rate. Most CC companies will actually lower your rate. A lot of the bigger ones like BOA though use to but have now raised rates “because of the uncertainties in the current economy”.