Hey Personal Finance! This is my first ever Reddit topic. I have been lurking this sub for a couple of weeks and I truly appreciate everyone who posts here; this sub is an absolutely amazing resource.
I am 27 and have successfully put together my first budget; I will be implementing it next week when I receive my next paycheck. Part of my goal is to start paying down my debt and improving my credit score, which is hovering around 500. The thing I am unsure of is which order is the best for paying off my various debts.
I have no savings, which terrifies me. I have factored in $100 per month towards savings. I am unsure if I should decrease this amount initially to pay off debts faster, keep it where it is, or increase it until I have built up a decent savings stash.
Beyond the $100/mo for savings, I estimate I have between $70-$100 extra per month to put towards debt. It would be no lower than $70, and could end up being higher than $100 - I am confident in my budget, but I rounded up a number of bills to be safe through the initial month or two as I see how it plays out.
My debts include: a Visa credit card carrying a maxed out $3,000 balance through my credit union; this is my only credit card. No fees or rewards; minimum payment is $55 and the APR is 18%.
Two types of medical debt; both originate from the same hospital stay about 13 months ago, and neither have ever received a payment:
One is from an actual hospital system for $240 and is not showing on my credit report. The other is from a radiology company separate from the hospital system, for $187, and is showing as two separate charges on my credit report, totalling that $187 amount, both showing in collections on my report.
Lastly, I have a 6 year car loan at 8% that I am in the middle of paying off, minimum payment is $356/month, with $13,843 remaining.
My initial plan was to pay off the medical debt showing in collections, then to pay off the medical debt not reporting, and then to aggressively attack the credit card until it is paid down. Car loan would be last as it has a lower rate, shows a great deal of on time payment history on my credit report, and once my score goes up a bit I can refinance it with my credit union to reduce the APR. After additional reading it seems that paying off debt in collections makes very little impact on one's credit report, and I am wondering if I should pay off the other medical debt not reporting first to try and prevent it from showing up at all, or if going all in on the credit card is optimal. Also, as mentioned earlier, I currently have $100/month budgeted for savings since I have none, but perhaps that is not the most efficient way to use that money, or perhaps I need to devote even more to savings initially.
Any suggestions on which order to pay down this debt is greatly appreciated. Also, if you think this should be formatted differently or changed to make the post easier to read please let me know! Hella newbie when it comes to formatting a post. <3 love you Reddit!
Submitted January 07, 2017 at 11:27AM by wantondavis http://ift.tt/2jf5mFP
