What’s our next “Early Payoff” challenge?
Just last week, I broke the news that we paid off our $25,000 car loan in just 25 months. When we first bought the car, we weren’t trying to pay it off fast, but I just began putting increasing amounts towards each payment, and sending multiple payments each month, until this past January, when I decided to try to pay it all off by August. Well, we paid it all off 2 months earlier than expected, and almost 4 years early overall!
So you may wonder, what’s next on our list. Well, if you read the title to this post, you would know by now, wouldn’t you!?!
We have 2 student loans, one more car loan, and one credit card. Here are the details:
Student Loan 1: $15,000 at 6.25%
Student Loan 2: $11,800 at 5.75%
Honda Ridgeline: $23,000 at 4.5%
Credit Card: $10,000 at 0% (until November)
The Deciding Factors
Alright, I know I should pay down the highest interest rate loan first. It just makes financial and logical sense. But here’s the thing. I’ve been carrying $20,000 in credit card debt since college, and I am finally to the point of paying it all off by year-end!
You may have read one of my first posts a year ago that I have maintained an almost consistent 0% rate on my credit card debt for the last 6 years by transferring balances between cards. That’s also why I still have about 7 cards. Sure, I pay about $50-75 every 6-12 months for the transfer fee, but it’s a small expense that allows me to tackle other, less forgiving, debts.
Back to the point, I’m sitting here looking at that $10k balance thinking “we can pay that off before Christmas if we stick to our budget”. This doesn’t count what we put on and pay off each month for regular purchases. This is actually stuff I’ve been dragging around for over half a decade.
Skipping over to the other loans, I could pay off one of the student loans, but the actual biggest monthly payment is the Honda Ridgeline (about $450 compared to $200 for each student loan). If I pay that off, then I open up a big slot in our budget in case we need the extra cushion. But…it’s not the highest interest rate, and it would take at least 12 months to pay off. I want instant gratification!!!
So basically, I haven’t decided what to pay down first. We’re still considering selling the Ridgeline altogether, or trading down for something half the cost (used of course). I have another month before a couple grand frees itself up in our budget though (through regular paychecks). Maybe I’ll decide in a couple weeks.
Anyone looking to buy a low mileage 2006 Honda Ridgeline RTS in the D.C. area? Asking price is $25,000, which is VERY competitive after looking at the currently available Ridgelines for sale online.