Help me out here

[SnappingShark]

So, I got a phone on a 2 year plan as most people do.
I am "financed" for the phone, as most people are.

I owe $500 on it (over the next 2ish years) - but I can afford to pay that off now ... so my question is ...

Should I pay the phone off now, and reduce my monthly bill by $25
or just pay the $25 every month on top of the bill?

I'm trying to reduce all of my bills to as little as possible to be able to properly budget for when kids come, along with getting stuff off of my credit report that shouldn't be there.



If this makes sense, then yay - if not, then boo!!

 

[snerd]

Surely there is interest on that financing............. so pay it off and save that usury!!

 

[sm4him]

Well, I usually get the cheapest phone I can, the one that I can get a "deal" on when I renew my contract. So I've never spent more than $100 for my phone, and thus don't have that expense on a monthly basis.

I would find out how much interest you ARE paying on that.
You are very smart to be looking to get your credit report clear and plan for the future. If you have debts, I'd highly recommend assessing which of those debts have the highest interest rates. Start paying those off first.

So, if you're only paying a tiny bit of interest to have your phone payments in installments, but you're paying 23% on a credit card purchase, then it makes sense to keep paying that $25/month for the phone and use the lump sum $500 (or whatever) to pay off debts that are accruing more interest.

Another suggestion: Start chipping away at one debt, an extra $10 or $20/month, to pay it off. THEN, when it's paid off, start adding what you were already paying on it monthly to the next debt.
So for example:
Credit card 1: You're paying $25/month on the balance.
Credit card 2: You're paying $25/month on the balance.

Try to up the payment on Credit Card 1 to $35 or more/month. THEN, when it's paid off, start paying that entire $35+/month, IN ADDITION to the $25/month you were already paying, on Credit Card 2. The idea is, DON'T start considering that "discretionary income" until ALL the debts are paid off.
Of course, it may not be credit card debt, that's just an example. The phone payment would fit in there just as well.

 

[photoguy99]

If you're still in the get out of jail free party of your contact, get out of it and switch to republic wireless.

 

[SnappingShark]

Yeah, I got an iPhone 5s just the other month, and because I had it split over my 2 year contract, I think it's just the cost of the phone divided by 24 months. So I don't think there's interest.

I only have car and a mortgage payments otherwise - I've been good at having 0 other card balances.

Sounds like the best thing to do is pay off the phone, and use the extra monthly 25 on the house - as over 30 years, that could be $10k in interest saved! yikes - adds up!!

 

[SnappingShark]

Unfortunately not! 4 months into contract now

 

[CameraClicker]

If you pay off the phone, will your bill be reduced? I'm not in your market. Here, the phone's amortization is usually silent, and the phone company picks up more profit if you pay the phone off early or don't get a new one as soon as the period is up.

 

[SnappingShark]

Yeah, my bill is split, and it's actually "financed" - which means I have the option to pay it off.

 

[CameraClicker]

If doing that saves more in interest payments than paying off some other, higher interest, debt, you should pay it off, if you can.

 

[KmH]

(over the next 2ish years) ... so my question is ...

Should I pay the phone off now, and reduce my monthly bill by $25

No doubt! Yes!
$25 a month saved x 18 months is $450 - x 19 months is $475 - x 20 months is $500 - x 21 months is $525 - x22 months is $550 - x 23 months is $575.