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Pay Off Mortgage or Car First?

April 10th, 2007 at 12:00 am


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?

Posted in Credit Cards, Paying Off Mortgages | 6 Comments »

6 Responses to “Pay Off Mortgage or Car First?”

  1. Kelly Says:
    April 10th, 2007 at 12:31 am 1176161494
    1176161494

    Pay off the car loan first. Some of the interest you are paying on the mortgage is tax deductible, so in essence that brings the interest rate down.

  2. quippymcflippy Says:
    April 10th, 2007 at 01:46 am 1176165993
    1176165993

    I'd say go with the car. I paid off my student loans this way (smallest sums first) and am way ahead of my classmates! It's all about the feeling of $ucce$$!

  3. MsSuperSaver Says:
    April 10th, 2007 at 02:33 am 1176168807
    1176168807

    I would vote for paying the car loan first also due to the tax benefits of your home mortgage. Great job on paying off your debts!!

  4. Ima saver Says:
    April 10th, 2007 at 12:54 pm 1176206043
    1176206043

    I would pay off the car, but keep putting that car payment away in a "car account" That is what I am doing.

  5. disneysteve Says:
    April 10th, 2007 at 01:37 pm 1176208661
    1176208661

    This is an impossible question to answer without knowing 2 things:

    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.

  6. heather Says:
    November 22nd, 2009 at 07:23 pm 1258917780
    1258917780

    I struggle with the same question. Seems like a smart choice to pay the car as the interest is not tax deductible. If you feel, however that you will pay off your car and then buy new one shortly there after, I might rethink the thought. Why pay off your debt if you already plan to accrue more? My advice, pay the car and drive it well after the life of the loan.

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