Now that the credit card payoff is within sight I need to decide which loan I'm snowballing next. Should it be mortgage #1 or the car loan?
I have gone back and forth on this decision, but I'm leaning toward the car loan right now.
The mortgage has a higher interest rate than the car loan and has a lower balance. If I were to snowball into that loan it could be paid off in 2008.
But my thinking is that the car loan is for something that depreciates quickly and if we were to have to get another car and this loan were not paid off we'd be rolling a lot of money onto another loan.
What would you guys do?
April 10th, 2007 at 12:31 am 1176161494
April 10th, 2007 at 01:46 am 1176165993
April 10th, 2007 at 02:33 am 1176168807
April 10th, 2007 at 12:54 pm 1176206043
April 10th, 2007 at 01:37 pm 1176208661
What are the interest rates on each loan?
What is your tax bracket?
If the mortgage interest is still higher after accounting for the tax deduction, then pay the mortgage first.
It doesn't make sense, financially speaking, to pay the lower interest rate first.
November 22nd, 2009 at 07:23 pm 1258917780
December 8th, 2009 at 01:18 pm 1260278289
- Cash flow. If you can improve your cash flow by eliminating a payment sooner you have a bit more of a cushion if for some reason you lose some of your income. That is less money you would need from your emergency fund. Even if your income remains the same you can snowball that into your larger debt.
- Car Insurance. Are you required to have more insurance on your car than you would normally have if it wasn't security for your loan? This is an added expense you can eliminate over and above your interest cost and should be factored in.
Good luck!