Card is 4100 at 22 percent, car loan is 9800 at 6 percent with four years left. Income is stable, no other debt, and I have about 800 in savings. The 300 a month is genuinely spare after everything including a small amount of fun money. Everyone in my life has an opinion and half of them say clear the car because the payment is bigger.
The counterargument you will hear is the snowball, clearing the smallest balance first for the psychological win. It is a real effect and it keeps people going. But here the smallest balance is also the highest rate, so both methods point at the same card and there is nothing to argue about.
One extra option worth pricing: a balance transfer offer with a 3 percent fee is 123 on your 4100, against roughly 900 a year of interest you are currently paying. That is worth doing if you can get one, provided you actually clear it within the promotional window and you do not spend on the new card.
And read what happens at the end of the promotional period before you sign. Some revert to a rate higher than what you left, which turns a good move into a worse one if you have not finished paying.
Keep the 800 buffer intact while you do this, and if anything build it to a month of essentials first. The most common way this plan fails is not maths, it is a 400 bill in month three going straight back on the card you have been killing.
Ring the card issuer and ask for a rate reduction before you start. Nine years of on time payments is leverage and the worst outcome is that they say no. Took me four minutes and 4 percentage points once.
@pandl_paula · last mo. · 3 replies
The card, and it is not close.
The arithmetic: 22 percent on 4100 is roughly 900 a year in interest. 6 percent on 9800 is roughly 590 a year, and it is falling as the loan amortises while the card just sits there. Every 100 you put on the card saves you 22 a year forever; the same 100 on the car saves 6.
At 300 a month plus your minimum, you clear the card in roughly a year. Then the whole payment plus the 300 rolls into the car and that disappears faster than the schedule says.
The bigger payment argument is about cash flow, not cost, and cash flow is not your problem here. Two extra things. Do not touch the 800, keep it as a buffer so a flat tyre does not go straight back onto the card. And if you know you will run the card back up once it hits zero, cut it up now, because the interest maths is irrelevant next to that.
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@threefund_dana · last mo.
The rolling the payment forward step is what makes this work in practice. People clear the card, feel finished, and quietly absorb the 300 into lifestyle.
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@kill_fee_kel · last mo.
Cash flow versus cost is the distinction I was missing. Everyone arguing for the car was arguing about the monthly number.
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