How should I handle this money

[DMatzo11]

I am currently in debt and working on getting out of it slowly. I am set receive a settlement of 20K sometime in the next couple months. I currently owe 17K on a def. comp loan which equates to 674.00 a month.

I also owe 14K on "one" (when in debt, poor decisions are made) of my cars with 0% interest. Equates to 300 a month with another 60 going to insurance.

Lastly, I owe about 15K in credit cards which varies monthly, but around 5-600 a month.

So my thought is to pay off the deferred comp loan due to the high monthly and the fact that I cannot "pay it down". You can only pay it monthly or pay it in full. With any remaining, I would pay down a credit card or two.

The other thought was paying off the car, selling it for what its worth (9-10K), and using the 9-10K to and remaining from 20K to pay off one or the other.

All of these loans could be smaller by the time I get the settlement, but probably not a drastic change

The 20K is a good problem to have when in debt but what is the best solution?

[greenskeeper]

list interest rates, balance, and monthly payment on each debt

[disneysteve]

I agree with greenskeeper. We can't answer your question without knowing the interest rates because that really determines the order of attack.

Do you have any emergency fund savings?

You mention one of your cars. How many do you have? How many do you need?

You say that the amount owed on credit cards varies monthly which implies that you are still using the cards. Is that correct? If so, you need to immediately stop using them. Stop adding to your debt and digging the hole deeper. If you don't have the cash, don't buy it. It's that simple.

Fill in some details and we can help you put that money to the best possible use.

[james.hendrickson]

yes, There are some basic pieces of financial advice we can probably offer (e.g. pay off your credit cards first), but we can probably have a better discussion with you if we have more details.

Feel free to provide approximate numbers if you are concerned about sharing the details...we don't mind.

[DMatzo11]

Thanks everyone,

More details

The car mentioned is my third. Only need two, not sure why I bought it, felt I wanted a "work car". But in reality, it was just me getting excited about buying a car, so I did.

The interest rates of each card are all above 12% except for one

Deferred comp loan doesn't list interest rates but I have been told its around 1-2% even though your considered to be "paying back yourself"

The car is 0%

When I said they vary in monthly, its because we had been using them because our income didn't match our debt, so groceries or little things were being bought on them. They are no longer in my wallet so the hope is I won't ever need to use them again.

Current balances on the cards are: 6000, 3900, 3100, 2900, 800

[msomnipotent]

Is the $674 per month causing you to put things on credit cards? If it is eating up a lot of your cash, I would just pay it off regardless of interest rates. If it isn't, I would pay off the credit cards and keep the rest as an emergency stash. At this point, I would sell the 3rd car even if the loan is upside down (unless it is drastically upside down, then I would sell one of the other cars). Then you can use that money to put towards the loan.

[DMatzo11]

Thanks for the reply. Its all eating up my cash I am leaning towards deferred comp just because I cannot pay it down over time, its pay it all now or pay it monthly. Definitely will attempt to sell the vehicle as well.

Appreciate everyone's kind advice.

[scfr]

Here's one idea:

1. Pay off car note (-$14K) and sell car (+$9K) = $15K left from settlement money & car sale, in savings account.

2. Add what you had been paying for car payment and insurance to savings. After 6 months, you have enough in savings to pay off the deferred comp loan.

3. Then, use what had been going to pay off the car note, car insurance, and deferred comp loan loan to pay down the credit cards. Right now you're paying $4.8K per year for the car and $8K per year for the deferred comp loan, for a total of $12.8K per year. You have $15K in cc debt so it will take you a little over a year to pay it off.

So, in theory, you could have everything paid off in less than 2 years.
This assumes not adding anything new to the cc debt, which means you may have to tweak your budget / spending plan. And if you have any changes like raises or finding another source of income, you could possibly accelerate the plan and get it paid off in less time.

You have a great opportunity with this $20K settlement. Congrats on coming up with a plan in advance.

[greenskeeper]

take part of the $20k to set aside for an emergency fund, and use the remainder to pay off as much of the high interest debt as possible. roll monthly savings into paying down remaining debt. Don't take on anymore debt while doing this.

[disneysteve]

take part of the $20k to set aside for an emergency fund, and use the remainder to pay off as much of the high interest debt as possible. roll monthly savings into paying down remaining debt. Don't take on anymore debt while doing this.

I agree. Set aside $3,000 as an EF.
Put $17,000 toward the credit cards.
Also sell one of the paid off cars and put that money toward the debt also.

Keep "paying" the credit card payments into savings until you have enough to pay off the loan.

[DMatzo11]

Love the suggestions. SCFR, really appreciate that advice. Had not thought about that way of doing it, but it makes a lot of sense.

Also agree with everyone about putting some aside as an emergency fund.

Again, really appreciate all the suggestions, and you have given me another direction to go in which appears to be a smarter direction.