Your Questions About Pay Off Credit Card Debt Calculator

Daniel asks…

Should I apply for a fixed rate loan to pay off credit cards?

I have $25,000 in total credit card debt (3 cards). Interest rates are 4.99, 5.99 and 11.74. The card with the highest balance is also the highest interest rate. According to a debt calculator I used, I can pay them off in 42 months with my income. I have been offered a fixed rate personal loan of $30,000 at 7.74%. I would pay off the credit cards and use the rest for legal fees (personal situation). Using the same debt calculator, I can pay the loan off in 48 months easily and probably sooner.

Is it worth it to apply for the loan? Will it hurt or help my credit? I do need the extra cash and do not want to take it from my home equity or put more on credit cards. Thank you for your responses.

richmama answers:

Why would you take 2 credit cards that interest rate is LESS than the fixed rate loan and transfer them to a higher rate?

Use the loan to pay off the highest interest card……pay the minimum on the 2 lower cards but take the payment you were making on the 11% card and send it to the fixed rate. This should help bring that balance down faster. When the fixed rate loan is paid, take that payment and add it to next higher interest card until paid off and then take THOSE payments and send them to the lowest card. Make sense? OR…see if you can do a balance transfer of all 3 cards onto a 0% credit card and go from there. It would only make sense to transfer all 3 if you can.

George asks…

20% down on house or pay off low interest credit card and/or car?

We are planning on buying a new house. We have enough money to put a 20% down payment. We also have credit card and car payment debt that is a little less than the 20% we could use for the house. The interest rate on the card is 4.99%. The car loan is 6.4%. The home loan will probably be 6+%. Since the interest rate on the credit card is less than the rate of the home loan, would it be better to put the 20% down on the house and then try to pay off the card and car loan in a few years or would it be better to pay off the card and car loan now and and just put 5% down on the house and have to pay PMI? Or maybe something in between like pay off the card but not the car (or vice versa) and put 10% down on the house. Is there a calculator out there somewhere to calculate the cheapest route?

We are working on paying down the credit card and car loan. At current rate they should both be paid off in about 4 years.

richmama answers:

Pay off the car and credit first. The interest on the house is tax deductible, where as the others are not. So 6.25% on the mortgage actually becomes (6.25% x (1-marginal tax rate (say 25%) = 4.68%. As long as your PMI is less than (6.25% – 4.68%) 1.57% of your home value it is worth paying off your other debt first.

Susan asks…

pay off credit cards or use with buying a car?

OK, I know I need to get a different vehicle soon and what better time to do it then at tax time? I am anticipating about $1,000 back and I was thinking of using it to assist in purchasing a vehicle, but then I got to thinking, “Would it be better to pay off $1,000 of the $1,400 in credit card debt i’m in or use it for the vehicle?” The credit score analyzer calculator said my score would be around 680 if I paid my credit cards down that much (compared to my current 647 score). Should I pay that towards credit cards or use it toward a vehicle. Either way, I am going to the bank to get a vehicle loan, so if I used that $1,000 toward a vehicle, that would be a $1,000 less I need to borrow. I am stuck on this one guys…any suggestions?

richmama answers:

I would use the $1000 to pay off the credit card debt first as generally, credit card debts carry a higher interest rate. Besides, as you mentioned, this would increase your credit score, too. With a higher credit score, you might get a car loan with a lower interest rate as well. In general, a car loan from bank would have a lower interest rate than the interest rate from the credit card of the same bank. Thus, lower your credit card debt as soon as possible.

Sandra asks…

Online debt calculator that takes into account future charges?

I am in the process of trying to get out of debt (pay off my credit cards, etc). But, life gets in the way and sometimes I have to use them.

Are there any debt calculators out there that take into account new charges each month?

For example, if my debt is $3000 and I am paying $400/mo, but still charging $100/mo, with an interest rate of 10%, it is going to take me X months to pay off my debt.

Sorry to confuse – I don’t need a debt counselor. I have a plan to get out of debt and my debt it quite managable right now. I am simply looking for a calculator. Thanks!

richmama answers:

Debt consolidation

getting out of debt is pretty easy with a debt consolidation plan
however it may get a bit tricky at times, I suggest you get as much information as possible online on this first,

a good place to start in my humble opinion is:

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How to Budget – Single Moms Can Make it Work

How to Budget-Budget tips for Single Moms

Single Mom BudgetOne of the most important concerns for a lot of single moms out there is how to budget. Numerous single moms go through a situation of trying to manage a tight budget just to provide continuously for their kids. This can be extremely hard for them, especially when they are facing and doing this on their own, with no partner to help and support them. Learning how to budget can make financial struggles feel like less of a burden.

However, having a good budget is crucial especially when you can almost guarantee some emergencies to happen to you and your family. Learning how to budget can help a single mom learn how they can manage their money better without all the stress and pressure. These tips will help all single moms to establish a household budget:

Learn How to Budget for Your Family

•    Firstly, determine how much money you are getting every month. This is critical when learning how to budget.  Make sure that you include all sources of income that are promptly available to you like pay checks, social security, child support and even dividends on bonds and stocks. Anything that you are sure of coming to you should be part of the budget.

•    Next tip is to list all the expenses by starting with the most vital ones such as rent, car payment, insurance, as well as utilities. You may also include in the top list the groceries and then that is the time you begin with the other expenses like credit cards, incidentals and medical expenses.

•    Carefully look at how much money are coming in versus the money that is going out. Your priority should be the bills because these are the ones that keep you sheltered and keeps food always present on the table. Pay all of those bills out of what you have kept in your budget and take a look of what’s left. This is a key strategy of learning how to budget.

•    Determine the number of non-important bills that you can pay, and pay as many as you can. However, you must rank them in order of priority first, and after that, you can start paying them. If it is hard for you to pay the full amount, or if you need to make some payment arrangements, you can always try to negotiate with the person or office you owe and explain everything.

•    Lastly, take a look at the money that was left. Always keep in mind that unexpected emergencies will always happen, so you do not have to wait for the next pay day because you have extra money for any emergency situation that might occur.

Learn How to Budget – Spend Smart

When learning how to budget make an effort to squeeze in your budget every month until you know it by heart. Maintain trimming off costs here and there, and the money that you will be saving should be directly into your savings fund. Having a budget can help you keep track of where all your money is going, as well as get hold of steps to ensure that all of the money is going to the right places for your kids. How to budget for single moms is extremely important, so it is crucial that you pay attention with your budget. Learning how to budget will help you feel in control of your finances.

Your Questions About Lower Debt To Income Ratio

Mandy asks…

Will a low income to debt ratio get me a better rate and/or lower mortgage payment?

richmama answers:

No it needs to be a lower debt to income ratio not the other way around, if you have a lot of debt and very little income then getting approved will be the key here.

Depending on your credit score will depend on your lower rate, anything right now over a 740 will get you no points and a better interest rate.

Joseph asks…

To lower my debt to income ratio?

should i pay off a low limit credit card or make a payment on a high limit card. like pay off a whole credit card with $2000 or pay $2000 towards a $5000 card

richmama answers:

Your debt to income ratio will be the same after you pay the $2000 towards your total debt.
Great that you are reducing your debt by $2000… But how you slice it up doesn’t change the outcome.

But… To pay off a maxed out account versus one that still has credit available is better for your credit score.

Pay off the card that is maxed out and see your score recover. If the cards are not maxed out then try to bring both balances towards the 30% of your credit limit line. That will also improve your score.

Chris asks…

How does a person calculate their debt to income ratio?

So here’s the deal. I applied for a home loan and was denied because of debt to income ratio. The confusing part for me is that my rent is more than the monthly calculated payment. I have a high credit score (almost 750), and 2 vehicle pymts. I suppose the real ? is how do I lower my ratio so as to qualify for the mortgage loan. any ideas would be appreciated.

richmama answers:

The number they used was your expected monthly payment (including taxes and insurance) plus your car payments, plus any credit card payments if you carry a balance.
You can pay off one of your cars to improve the ratio, or look for a cheaper house.
Your rent is not relevant.

Thomas asks…

trading in a car for lower payment with high debt to income ratio?

I wanted to know if I would have any problems trading in my car for one with a lower monthly payment. My payment is $350 now and I would be looking at about $200 payment on a different car. If I have high debt to income ratio, will I have a problem getting a loan? or will they consider the reduction in payment when approving the loan?
I am just starting to look into this, and I have not talked to a financial institution yet. I was hoping that someone could tell me in general if you are trading in a car with a payment, if they do not count that payment against your debt to income ratio.

richmama answers:

You are over-analyzing this too much. Go to a dealership and find out. No one here can answer that question for you. WAAAAAY too many factors involved.

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How to Make a Budget – Family Budgeting How To

How to Make a Budget – Family Budgeting 101

make a budgetIt is more important than ever to learn how to make a budget and stick to it.  If you live alone or have a large family to raise, chances are that people are expecting you to stretch a dollar as far as it can possibly go in these challenging economic times. Learning to live within your means is one of the most important ways of staying financially solvent. When you make a budget it will help you determine what money you spend where, so that your spending doesn’t control you.  You need to control your spending and do that you need to make a budget.

How to Make a Budget

There are few simple steps you can take that will make a light turn on for you as far as where your money goes:

·      For one week, keep a notebook and write down every single thing you spend money on –  whether it is paying a bill like a mortgage or car payment to buying a café latte at your local coffee shop.  Write it down and at the end of the week, categorize your spending like this, (1) wants, (2) needs, (3) unexpected expenses. This will help you later when you go to make a budget.

·      The next thing to do is not cut out the (1) wants category completely, but see if you can reduce the number of things you spend money on.  For instance, taking a bagged lunch to work just one day a week instead of eating out can add up to savings of $40 a month, which translates to $480 a year.  If you consider all the little ways your pennies add up, and make small changes, you’ll find you can achieve a similar lifestyle with very little sacrifice and a whole lot of savings. Won’t take long to make a budget now.

·      See if you can spend less on things you must purchase, like groceries and gas, by taking advantage of sales and store coupons. Buy in bulk if you know your family uses a lot of something. There is no need to spend $1.00 per roll on toilet paper if you can purchase it on sale, or in bulk and pay 30 cents per roll. Again, small savings add up to big savings. But when you make a budget – don’t buy things just because they’re a good deal.

·      Trade one expensive hobby for a cheap or free one each month.  If you love to read, try going to your local library instead of the bookstore.  If you love to golf, find a course that has free or dirt cheap green fees, instead of playing at a country club.

·      To make a s budget work, stop buying things with credit cards. The only way of changing the way you see money is to spend what you have, not what you expect to have. If you can’t afford to pay cash for it, that means you can’t afford it – yet.  Try saving up for things instead of buying on impulse and using credit. You’ll feel a greater sense of accomplishment skipping a few high dollar dinners to buy that great sofa you saw at your favorite boutique.

·      Studies have proven that people gain more happiness from experiences than things.  Spend time with friends.  Learn a new language. Plant some new seeds on your patio garden.  These things are all practically free and add to your sense of self worth without breaking the bank.

Make a Budget – Work it For You

When you make a budget you need to make it work it for you.