Pay off car or make a dent in student loans?

[debtquestion]

Hi! This is my first post here and I'm hoping for some advice. I've been working overtime like crazy the last few months. Last month I was able to pay off the last of my credit card debt and my only private student loan, which had the highest interest rate of all of my student loans. I also have a decent emergency fund. I don't think I'll be able to work this much in future months, so I suspect I'll have to go back to making minimum payments again soon...

So, here's my question: I'm expecting another good paycheck this month, so should I COMPLETELY pay off my car or make a small dent in my student loans?

- My car loan has an interest rate of 2.74% and I owe about $3k on it. I can (hopefully) pay off the balance with my next paycheck. My credit score is mediocre right now and I'm trying to improve it. So maybe I should keep paying minimum on my car to improve my score?

- I have about $30k left in student loans, with different interest rates ranging from 4.5-6.8%. I'm still in school part-time, so all of my student loans are deferred. Lately, I've continued to take out federal student loans every semester, which have very low interest rates these days. Then I just use that money to pay off my older student loans, which have higher interest rates. I'm nowhere near graduating, by the way, and I know I'm just reshuffling debt here.

Thanks in advance for any advice!

[ladonnarosso]

Personally, I would take the peace of mind of completely paying off the car loan. That way you would own it free and clear and have one less obligation to keep track of. The student loan will still be there no matter what, so I would pay off the car loan for the psychologial reward, rather than paying down the loan that might make more sense financially.

[DVDFreaker28]

You should pay your car off, I paid my car off last month and it feels great!

[HappySaver]

It would feel better emotionally for you to pay off the car.

But financially it makes more sense for you to put the money towards the highest interest 6.8% loan.

As long as your job is stable and you will continue to be able to make the car payments, any and all extra payments should go towards the higher interest loans.

The car will fall off naturally, soon enough.

[Permanent Temp]

Pay off the car. That will free up money each month. You could then shift that money toward paying off the loan and or save the payment toward the next car.

What are your current loans? Also paying off the ones with a higher interest rate is a great strategy but remember also that there are subsidized and unsubsidized loans. Your unsubsidized loans are racking up interest daily while the subsided ones do not. Although if you are paying off your oldest loans that is probably a mute point but just keep that in mind.

[PRICEPLUS]

I would pay off the car and have it free and clear. I would then take the amount I was paying on the car and add it to the amount I was paying towards the student loans. Paying off car loan looks good on CC report and you need not worry about repo of car!

[cashinasnap]

Yes paying off car loan would be a smart idea, though I believe that debts shouldn't be kept too long. Else multiplying interest rate spoils the financial condition.

[greenskeeper]

pay off car and apply your old "car payments" towards the student loan or any other debt.

[csasko33]

Pay on/off the highest student loan 6.8%

I vote make the dent on the college loans.

Your student debt will always follow you until it is paid off. It is like a ball-and-chain that even bankruptcy cannot fix. Also the interest rate is higher than your car payment. You are used to paying both at the same time. Since you have different college loans varying in interest rates try to pay off the highest one. That way you have the sense of accomplishment and bring down the amount you are paying in interest daily faster.

Make a game of it and enjoy it. Example pay off the Student Loan (SL) for 6.8%, then the next highest SL, then the next and so on. After all that pay off your car.