pay off personal loan or put money into mortgage?

[whitestripe]

I have a bit of a dilemma:
DF and I are only a few weeks away from settlement on a house we are buying. I have a personal loan for my car, with another bank, that takes a $37 repayment each week. There are no fees for early payment of this personal loan. Further info:
Mortgage: $304 000 @ approx 6%
Personal Loan: $3500k @ approx 12.99% + $7 monthly fee, variable rate.

on settlement, we will have approx $5-$9k leftover from a First Homeowners Grant. My inital thought was that we would put this money into our offset account (reducing the interest payments of the mortgage) and have it as a start of our Emergency Fund. Once it's built up a bit more, we would buy a new fridge (as we REALLY need one) and then continue to save for 3 months of expenses. I would contribute $10 a week from my personal allowance (which is $60 a week) for extra payments on my loan, and possibly any extra money I earn from overtime and ebay sales - because really it is MY loan, not DF's and I am hesitant to allow him to pay for it in any way.

DF thinks it would be a good idea to pay my loan off with the extra cash from the homeowners grant - seeing as the personal loan costs $7 a month in fees, plus approx $40 in interest (at the moment) a month, as well as the principal payments. Then we can concentrate on our EF and Mortgage payments without having to worry about other debt.

I just like the security of having a cushion of money straight away, which is why I am hesitant to take that amount out of our proposed EF straight away.

Because we are undecided, I said I would post the question here and see what everyone has to say!

Please ask any further info you might need in regards to the loan etc.

Thankyou in advance!!!

ps. just a note: this is NOT a post asking for advice on whether or not we should be getting a mortgage with prior debt! I just want to make that very clear.

[Seeker]

I'd pay off the personal loan. 13% interest is not insignificant.... over time that adds up.

You do not state income nor how quickly you'd be able to repay your EF nor pay down the mortgage if that's your choice. But at 6% interest, the better option would be to pay the personal loan.

[jIM_Ohio]

Personal loan is more important to pay off- because you get that back into cash flow sooner.

Paying money on the mortgage may or may not save you more money (in interest payments), but you will not realize those savings until the mortgage is paid off in 20-30 years.

Because the private loan is 13%, I would pay that off soon. If you wanted to pay extra on the mortgage after that, another discussion for later in the thread.

[whitestripe]

thanks guys.
if it helps:
our income is $1414 per week.
we will be putting $300 per week into the EF, and $175 into the mortgage extra per week, until we have saved around $4000 to go into the EF, then we will be putting $250 per week into the mortgage, $150 a week into the EF and $75 into a mini savings fund for other household items.

[creditcardfree]

Pay off the personal loan. You will have that EF funded so fast, it is not worth hanging on to that high interest loan. Good saving plan, by the way.

[whitestripe]

thanks everyone!
i think we have come to the conclusion that we will be paying the loan off first