I was answering Q and A the other day and found a question i felt was worth sharing in my blog.  The question was should i pay off all debt to acquire better financing? 

I personally feel that this question is a lot bigger then it sounds with issues ranging from debt to income ratios new lending guidelines and how would this payoff possibly affect the persons ability to bring a down payment to the purchase of the new home?  Then i decided to just make the simple answer simple. 

If you can make more money with your cash then your debt interest rate keep your cash in not then pay off the debt.  For example.  if you have a credit card and you owe $5000.00  Your minimum payment is $130 a month and it would take you 15 or more years to pay it off.  Lets assume the interest rate on this card is 15%.  Unless you are making more then 15% on your cash you would be better to pay this debt off.  If you have a few debts i would recommend putting your debt into an database like xcel so you can rank your debt.  You should pay off the smallest debt first.  Lets go back to the original $5000.00 credit card example and add a car payment on $7500.00 to the mix.  And a payment of the Car loan of $350 a month.  By paying off the credit card first you can then add that savings of not having credit card debt to your car payment.  (almost paying half that bill monthly with your saved cost)

          Amount              Min                

Visa     $5000.00           $130

Car       $7500.00           $350

Total    $13500.00          $480

Visa      0                         0       Paid off

Car       $7500                $480  (paying an extra $130 to principle monthly)

As you can see this can quickly become a snowball gaining speed in paying your debts off.  I have been working this plan for a while now and it has helped me out in so many ways.  I hope this is helpful to those who might have this same question. 

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