Best strategy for my situation?

bdl89

I posted this in the stickied thread in this forum as well. Hope double-posting is OK. If not, feel free to delete.

Hi:

My wife and I, without really knowing what we were doing, refinanced our mortgage and took on a line of credit to take on a major renovation. After the refinance paid out part of the debt, we were left with an overall LOC debt of +$20 000.

A year ago, I converted that LOC debt to a personal loan at a lower interest rate. It was a "blended" payment arrangement, where interest and principal payments remain the same (adjusted yearly with interest rate changes and early payments factored in). We now have a balance of around $17 500.

We are tired of being in debt, and looking to get out as fast as possible. With that in mind, I took a couple of actions (included are some relevant details):
--applied for, and received, a balance transfer credit card with 0% interest for 10 months. (1% transfer fee on any balance transferred). It has a credit limit of $8000.
--converted the loan back to a line of credit, with a 1% lower interest rate (7.86%). Seems puzzling, but with the LOC, we aren't forced to make the blended payment of $415.63 to the loan each month.
--the above seems risky, I know, but it gives us the flexibility to transfer a balance to a lower interest option and pay down as much debt as possible at a lower interest rate, while not being forced to make $415 in blended payments at a higher interest rate.
--we have become strict budgeters, and are committed to paying $600 towards paying down debt each month going forward.

With this in mind, I'm still a bit confused as to the best approach. Do I:
a) transfer $8000 (credit limit) of LOC to the transfer card, and pay down $600/month for 10 months, than transfer remaining balance back to LOC.
b) transfer $6000 (10 months x $600/month) to the balance transfer card, and pay that off in its entirety over 10 months.
c) some wiser option I'm not thinking of?

Am I off base in thinking that we will save substantially if we do this, and remain committed to $600 per month? What would my savings be like?

No matter which option, we will transfer at the end of the 10 month 0% interest period, either back to the LOC, or to another, similar 0 or low interest balance transfer card.

Anything I should keep in mind, or further advice?

sourcrates

Hi,

This is a UK site, most will not be familiar with the American system unfortunately.

theoretica

As above, I am not familiar with the details of the accounts - but why are you thinking about paying extra off the bit of the debt you have at 0% (or rather 1% fixed?). Pay the minimum you can to that as you have already paid all the interest for 10 months and as much as you can to the account charging you nearly 8%.