What creditor should I pay if I have a lump sum?
Facing a judge's decision after a divorce, I was left with over $34K in marital debt. My ex-husband is ordered to pay me $11,500 lump sum. My debt includes a $10K Cap One credit card at 9.9%, a Chase credit card that I closed on a hardship and owe $13K at 6% and a vehicle with a balance of $11.5K at 6.2%. I am wondering which one to pay off, or should I throw some money at all of them. The vehicle pay off will eliminate the highest debt obligation, but the 9.9% will take me forever to get rid of. I am now staying with a friend but would love to be able to live alone again as soon as possible, as well as to get out from under this nightmare as quickly as possible. Thank you in advance for your advice!
Generally speaking, it makes the most financial sense to pay down high interest loans first. In this case it would be your 9.9% credit card. However, if you are in financial distress and are facing bankruptcy or are considering a debt resolution program, then it makes sense to pay off the car loan so that you continue to have a mode of transportation to get to work, and continue to earn an income.
Regardless of what you decide to do you may want to set aside some of the money into a rainy day fund for reserves.
To learn more about your debt options see Debt Consolidation and Bill Consolidation.
Because it is the case that I don't know the specifics about your overall financial situation I encourage you to consult with a certified financial planner, CPA, or other financial professional to review your debts and investments in detail. He or she should then be able to tell you how best use the funds to pay down your debts.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/
Debt statistics
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Housing debt totaled $12.612 trillion and non-housing debt was $4.891 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Tennessee, 15% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 5%.
To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.
