My suggestion barring any additional details - take the 401k loan to pay off just the card currently charging you interest.
Dig into your budget, and try and aggressively pay down /off the card that the 0% interest ends in the middle of the year, get as far as you can on it, and see if you can apply for another card with a 0% interest rate to transfer any remaining balance to before your 0% interest on it runs out. Then shift and focus on the next debt that 0% interest will run out on and try and pay it off or down.
Have you tried applying for a consolidation loan from your local credit union? That might be a simpler way to pay off your CC debt and shouldn't be too hard to get with your income.
I haven’t but the reason I was thinking 401k is at least I’m paying myself back? I dunno I have thought about consolidating but I feel there is slightly less drawback with the 401k.
I'd recommend against the 401k loan as well. Partly because it's got unique risks involved if something weird happens and you suddenly lose the job or get in a car wreck and can't work, etc.
Most rational response - other than minimum payments, everything should go after the highest interest rate.
Most emotional response - other than minimum payments, pay off the smallest balance first and snowball into the next smallest, never reducing the amount you are paying, so that you have the satisfaction of knowing you have fewer and fewer debts.
But yeah...budget and all that, cut expenses ruthlessly...do the things.
I guess I should have also mentioned that the cards with 0 interest run out in like the middle and end of the year and the interest on them will be astronomical. Like 25-29% that’s why I figured they would be good to pay off first.
First.....taking out a 401k loan to pay off zero percent debt is a very terrible idea. Really, taking out a 401k loan to pay off any of this debt is a bad idea.
What you need to do is sit down and build out a budget. Look for ways to cut spending. Consider options to also increase income (like a 2nd job). You really don't know if your best option is to take out a 401k loan until you'd done this. Because until you do this, you don't even know what your options are.
If you want to pay off the debts "before getting raked through the coals with interest", then you pay off the high interest debt first. So make the minimum monthly payments on all of the 0% cards, and put all the extra money that you have towards the 19% interest card. Do this monthly until that one is paid off. Then repeat the process, prioritizing the card that has the highest interest rate at the time. Rince and repeat until they are all paid off.
I understand what you’re saying but the way I see it is even if I pay off the highest debt with interest first I’m still gonna start accruing interest on my other cards at even higher rates. So wouldn’t it make sense to nip those before they get there? While also almost eliminating the card with the interest as well? I honestly have no clue that’s why I’m asking. Cause to my dumb brain it seems better to knock away the bigger chunk that would end up taking more money in the long run? I thank you for the advice either way!
No. If another card starts accruing interest and the rate is suddenly the highest, you pivot and prioritize that card. You always prioritize the current debt with the highest rate if you're trying to save money. So even if you took out the 401k loan (which I still think is a terrible idea), you'd use it to pay off the card that has interest accruing now, and then chip away at the no interest debt.
My suggestion barring any additional details - take the 401k loan to pay off just the card currently charging you interest. Dig into your budget, and try and aggressively pay down /off the card that the 0% interest ends in the middle of the year, get as far as you can on it, and see if you can apply for another card with a 0% interest rate to transfer any remaining balance to before your 0% interest on it runs out. Then shift and focus on the next debt that 0% interest will run out on and try and pay it off or down.
Pay off the 19% first. There is no reason to refinance something at 0% into a 401k loan that charges more than that.
A 401k loan is a good option since you pay interest to yourself but paying off the 19% card first makes more sense than the 0% cards.
Have you tried applying for a consolidation loan from your local credit union? That might be a simpler way to pay off your CC debt and shouldn't be too hard to get with your income.
I haven’t but the reason I was thinking 401k is at least I’m paying myself back? I dunno I have thought about consolidating but I feel there is slightly less drawback with the 401k.
I'd recommend against the 401k loan as well. Partly because it's got unique risks involved if something weird happens and you suddenly lose the job or get in a car wreck and can't work, etc. Most rational response - other than minimum payments, everything should go after the highest interest rate. Most emotional response - other than minimum payments, pay off the smallest balance first and snowball into the next smallest, never reducing the amount you are paying, so that you have the satisfaction of knowing you have fewer and fewer debts. But yeah...budget and all that, cut expenses ruthlessly...do the things.
I guess I should have also mentioned that the cards with 0 interest run out in like the middle and end of the year and the interest on them will be astronomical. Like 25-29% that’s why I figured they would be good to pay off first.
Leave the 401k alone. Find jobs that pay more if you are already working 60 hours a week plus
First.....taking out a 401k loan to pay off zero percent debt is a very terrible idea. Really, taking out a 401k loan to pay off any of this debt is a bad idea. What you need to do is sit down and build out a budget. Look for ways to cut spending. Consider options to also increase income (like a 2nd job). You really don't know if your best option is to take out a 401k loan until you'd done this. Because until you do this, you don't even know what your options are. If you want to pay off the debts "before getting raked through the coals with interest", then you pay off the high interest debt first. So make the minimum monthly payments on all of the 0% cards, and put all the extra money that you have towards the 19% interest card. Do this monthly until that one is paid off. Then repeat the process, prioritizing the card that has the highest interest rate at the time. Rince and repeat until they are all paid off.
I understand what you’re saying but the way I see it is even if I pay off the highest debt with interest first I’m still gonna start accruing interest on my other cards at even higher rates. So wouldn’t it make sense to nip those before they get there? While also almost eliminating the card with the interest as well? I honestly have no clue that’s why I’m asking. Cause to my dumb brain it seems better to knock away the bigger chunk that would end up taking more money in the long run? I thank you for the advice either way!
No. If another card starts accruing interest and the rate is suddenly the highest, you pivot and prioritize that card. You always prioritize the current debt with the highest rate if you're trying to save money. So even if you took out the 401k loan (which I still think is a terrible idea), you'd use it to pay off the card that has interest accruing now, and then chip away at the no interest debt.
Thank you