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Which remaining debts should I pay off first?

I just recieved 33k. i first put 10k into savings. i had nothing. i then paid off a motorcyole loan of 7500.00 with 18% intrest rate.. Credit card 1 2200.00 with limit of 2300 paid off. credit card 2. 1200.00 with 2000.00 limit. paid off.
12k remains. i have another motorcycle loan 6000.0 balance 8% int. $120.00 mth. and 2 Fidelity 401k loans. which i still contribute to, payroll deduct biweekly.

1 9000.00 158.29 61 remaining.

2 8000.00 161.98 58 remaining.

What should I pay off first?
I'm 54yo. 4.5 years out of a BK 7. current credit score 675. i pay off the cards each month and mostly use for daily expenses. they are cash back cards. trying to rebuild the credit so
I can purchase a property in the near future in AZ. for about 120k that i could rent out in season and use myself until I retire and and leave Chicago. Thank you for your input. CHarlie

Aug 01, 2014 by Charles from Glenview, IL in  |  Flag
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3 votes

I am wondering how you came into all of the debt, and if once all this is done you are making ends meet.? Can you really afford this motorcycle without going into debt again? If you will be forced into debt again in order to pay for your monthly bills, I would say sell the bike and use the proceeds to pay off all the debt.

If you are now living within your means (run the budget numbers!), I might suggest that you pay off the 401k loans. Use the increased cash flow to further beef up your cash reserves, so you won't need to go there (401k) again.

3 Comments   |  Flag   |  Aug 01, 2014 from Bridgewater, NJ
Phillip Richard Christenson

You beat me to it James.

Flag |  Aug 01, 2014 near Minneapolis, MN
James D. Kinney, CFP®

Too funny. We disagree on the 401k loans a bit. Assuming he can afford the bikes, I was letting him keep the 8% bike loan - paying it and keeping the 401k loans just feels wrong. Feels too much like a 401k loan to buy a motorcycle, which just is not right somehow. Plus I don't like the risk of repayment requirements on 401k loans if he should be terminated and not have the cash to repay. Better to repay, in my opinion.

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Flag |  Aug 01, 2014 near Bridgewater, NJ
Phillip Richard Christenson

You make a good point on the 401k loan. He should consider how stable his job and how long he thinks it will take to pay everything off. The 8% risk free return is what's tempting to me.

Flag |  Aug 02, 2014 near Minneapolis, MN

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2 votes

Hello Charlie, Based on what you described, I would suggest you pay down your other motorcycle loan then work towards the 401k loans. Once you are debt free I would highly recommend you try to stay that way. And you will probably not want to hear this but considering you have two motorcycle loans, I think it's safe to assume you also have a couple motorcycles. If that's the case you should consider selling them to pay off your 401k loans. Just my thoughts, but I would prefer to not deal with the stress and other financial issues associated with debt rather then owning a motorcycle.

Comment   |  Flag   |  Aug 01, 2014 from Minneapolis, MN

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