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Originally Posted by getoutofdebt
We have a $14,000 home equity loan at 7.25% apr, a car loan on a 7 yr old car for $9500 at 5.99% apr and $90000 in savings at 3-4% interest rate.
We are currently having a baby and have short-term goals of starting a business so we don't want to get rid of too much cash. We probably will only be in this house for another 3-5 yrs.
Should we pay-off the home equity loan or the car loan or both?
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I would pay off the car loan first and strive to never have a car loan again. Ideally, you shouldn't borrow money to purchase a depreciating asset. I can't help but wonder why you still owe $9,500 on a 7 yr old car. How long was your loan and how much is the car worth?
What I would do after paying off the car would really depend on your overall financial situation. Are you saving enough for retirement? Do you have any other debt (credit cards, student loans, etc.)? Without knowing that, I can't recommend paying extra on the home equity loan (what was that loan for, by the way?).
Also, there is no way you should be keeping $90,000 earning only 3-4%. That is ridiculous in today's world. You should move all of it to a high yield account. There are plenty paying 5.25% with little to no minimum balance. Then, with whatever portion of that exceeds your short-term needs, start dollar-cost averaging into a couple of good mutual funds to boost your returns.