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Which should I pay off 1st?
I have student loans in the amount of $4,334.56 @ 4.21% interest which I could knock out by December of this year and be done with them.
I also have an auto loan at 11.99% that I owe $11,532.69 and have 31 payments remaining.
I have just paid off the one CC I had a balance on--PRIOR to being charged interest --it was in the 0% stage and want to decide what is the BEST way for me to pay down the 2 remaining debts I have--aside from my house.
What's best and why?
I felt paying the loans off 1st would provide more "instant" gratification--as I would see results faster. The student loan payments are only $65 monthly--the car $440.
3 Answers
- ReenaLv 71 decade agoFavorite Answer
From a smart financial standpoint:
Pay off the high interest car loan as fast as possible. Make sure that when you send them "extra" payments that those are applied to the principal and not applied to any portion of the interest...
Get everything in writing... and then send separate checks to them with the notation that this money is to be applied towards the principal.
This will reduce the life of your loan dramatically...
Your student loan... pay off at your leisure. 4.21% and you only owe them $4334 ... not a big deal. Use any extra money you have to reduce that car loan. Your car keeps depreciating... and if any possible knock out that car loan before you end up with a vehicle that is worth less than the balance of the loan.
- 1 decade ago
There are two schools of thought here.
1. is pay the smallest balance first regardless of interest, then when that is paid off. Use that amount you were paying to the student loans and in addition to the minimum payment for your auto loan and pay that off second. You get gratification earlier and allows you to take a month off to splurge for a month as a reward to yourself.
2. Is to pay off the highest debt first. This "seems" slower, but may be faster than the 1st option and may cost less. Then roll over the amount you were paying to your auto loan to your student debt.
I'd suggest option 2 if you have the disciple to stick with your plan. Pick one and work on it.
Good luck.
- ?Lv 71 decade ago
I would make the car loan the priority and add extra dollars each month toward the principle.