DebtPrioritization #LoanRepayment #FinancialPlanning
Hey everyone! 👋 So, I’m currently juggling two debts and I’m torn on which one to prioritize. Would love to hear your thoughts on this!
Here’s the situation:
- Debt with Commbank: $12,000, 18.9% interest, minimum payments of $125 per fortnight, current balance $11,450, 7-year loan term.
- Debt with ING: $10,000, 18.99% interest, minimum payments of $171 per fortnight, current balance $7,890, 3-year loan term.
I have $400 a fortnight allocated for debt repayments in my budget. Originally, I was thinking of splitting it evenly between the two debts ($200 each). But now I’m wondering if I should focus on paying off the smallest loan first or tackle the one with higher long-term costs.
Any insights, experiences, or tips on how you tackled similar situations would be greatly appreciated! Let’s help each other out on this journey to financial freedom. 💸
My personal take would be:
- Consider the snowball method: Start with the smallest debt first to build momentum and motivation.
- Check if there are any opportunities to consolidate or refinance the debts: You might find better terms that could save you money in the long run.
- Stay consistent with your repayments: It’s all about forming good habits and staying on track.
Can’t wait to hear your thoughts! 🤔ðŸ’
Holy interest rates batman.
Rates are basically the same, pay the one with the lower term off first.
Interest is basically identical.
I would pay minimum on CommBank loan and smash out the ING as fast as humanely possible
Two schools of thought. 1: Pay down the highest interest loan first. 2: Pay down the lowest balance loan first.
In both examples, you prioritize 1 only loan with all available funds, and only make the minimum repayments on the remaining loans.
As debts are cleared, add the minimum repayment amount from the cleared loan to the full payment amount on the next loan in the queue.
Option 1 means less overall interest paid, Option 2 has psychological benefit of over smaller balances quickly, then putting extra money towards the budget loans.
For what it’s worth, we used Option 2 when we committed to clearing all our loans before we got our mortgage. Good luck!
You should consider debt consolidation and try to get a lower rate, then pay it off as one debt.
Since interest rate is basically the same on both, I would throw everything at the smaller loan (still pay minimum on other loan).
Those interest rates are a killer. I would go to ground and cut every possible expense, sell things around the house and pick up extra work to try to clear them as soon as possible.
>I have allocated 400 a fortnight to debt repayments in my budget
If that budget has more available that could be refocused to debt repayment, do that.
If you are saving, consider adjusting how much you are saving so you can smash these debts off faster.
Yeah at those rates i would be trying really hard to get them refinanced into another product, even getting close to 10% will save you buckets.
At 19% your paying ~4180 annually in interest, and paying down 4800, so your decreasing your debt by ~50 a month.
Lower rate, another job, sell something. This is not really a spiral that is easy to get out of without something giving up.
Do not take on more debt.
idk if this is dumb question and i know you all probs think im dumb anyways so i don’t see the harm in asking. why is everyone suggestion the smaller debt first? when i used the debt calculator i would pay so much more total the longer i have the combank loan so what makes the smaller loan the better option? is it just so it’s gone faster?
Most of the time, you would want to tackle the one with the higher interest rate, in instances such as this, where the interest rates are fairly similar, just beat the absolute hell out of the one with the smaller balance owing. In this case the ING loan is both a higher rate as well as a smaller total balance owed.
As some other people said, if you haven’t already, go and see Centrelink about getting financial assistance regarding your brothers
You never have to make you life a living hell just to get out of debt but make sure your not spending money you don’t need to. Take all of your expenses and put them into a spreadsheet week by week and then keep that money aside and you shouldn’t have to worry too much about financial stress. Put every other cent into the loan.
I’d be happy to help you make a budget if needed
Good luck with the future! 🙂
The debt to society
How quickly can you pay off these debts? CC with a low rate, 1 off, bank transfer rate maybe an option. But you’d want to check the fine print and make sure you don’t get caught out.
You’re paying close too $4200 a year in interest, and your total repayments add up too like $4800. You need a debt consolidation loan asap.
At this rate you are going to be paying this off for like 15 years.