car vs cc

[irmanator]

I have my bills set up on automatic bill pay thru my bank not theres. Because I get paid every two weeks, I have one set that gets paid this check and another the next check alternating. My car payment has gotten ahead to where I am not due to pay till 12/04/12. (because a month that they go by is approx 4.3 weeks and I pay every 4 weeks.) I just noticed this.

so My question is since the bank takes each payment and counts it toward the next month, (i.e. each payment goes to a month, when I get ahead i am ahead in the way that I am not "due" instead of counting it towards principle.
Is it better to leave it be and get really far ahead or skip a month or two till I am back on track and use the money to pay cc down? the cc will count it as extra principle now.

fyi car loan is at 12% cc is at 21 % but the cc is low enough that i only pay 20 month in interest and the car is 70 mo interest.

[dczech09]

Do you have any other debts besides the credit card and auto loan?

Which has a higher balance?

The car loan is 12% with $70 per month in interest. That would mean the loan amount is about $7,000 (give or take).

The credit card is 21% with $20 per month in interest. That would mean the credit card balance is about $1,143 (give or take).

So your credit card is not only the higher rated debt, but it also is the smaller balance.

What you should do is pay the minimum on your car loan (yes, even though you are "ahead") and pay off the credit card as soon as possible. Once the credit card is gone, go after the car loan with everything you have.

It does not matter that you are "ahead" with your car loan. You want to pay to thing off as soon as possible, especially with it having a freakishly high 12% rate.

Technically, I am "ahead" on my student loans by years- but I don't care.

Pay off the debt on your schedule, not the bank's.

[kork13]

You should pay attention to how your car payments are being counted toward your loan. As is, your payments are simply paying in advance. What you should do is make your extra payments as principle payments. Getting your extra payments characterized as principle payments (vs. pre-payments) will reduce your loan amount and total interest more than just letting the bank call them pre-payments.

[jpg7n16]

fyi car loan is at 12% cc is at 21 % but the cc is low enough that i only pay 20 month in interest and the car is 70 mo interest.

You should absolutely pay more each month on the CC until it is gone. I wouldn't pay another dime to the car until you have to.

Balances don't matter.


You have extra dollars each month. Would you like those dollars to save you 12 cents or 21 cents?

Pay off the CC.

[joshuaking]

In addition to all the good advice you've already gotten here, let me add one more thing to think about: The car loan is a secured loan; if you don't pay your car loan they will come and take the car.
If you were worried about your financial future, I might pay off the car first, to make sure I had transportation. But if you foresee your income being relatively stable, I would definitely pay off the credit card first, since it has a much higher rate of interest. When it is paid off, then you can really attack the car loan.

[Tree0164]

I would focus on getting the credit card debt before the car loan. Then snowball the credit card payment.

[irmanator]

Thanks for your advice. My job is stable, (knock on wood) I realize the percent on the cc is higher, but the $$ amt of interest on the car is higher per month. Plus when I get the car paid off I can reduce the insurance which will save me more money to put toward the cc. Well that is my line of why I wanted to pay more to the car. I do pay extra on the cc also.

[jpg7n16]

Thanks for your advice. My job is stable, (knock on wood) I realize the percent on the cc is higher, but the $$ amt of interest on the car is higher per month.

Why are you looking at the total interest paid on the balance, as opposed to the interest you could save for each dollar you pay towards the balance?


So if you had $1,000 in hand -- say you had a $300k mortgage charging 1%/year ($3,000) and a CC with a $1k balance and a 75%/year interest rate ($750)... you would rather try to pay that $1,000 towards your mortgage???

Why not? The house charges more in total interest, and when you look at your monthly payment, the mortgage has way more money that goes to interest. Based on your logic, as opposed to paying off the $1,000 CC and saving $750/year interest, you should pay down the mortgage and save $10/year.

Your logic makes no sense to me.

[siggy_freud]

Thanks for your advice. My job is stable, (knock on wood) I realize the percent on the cc is higher, but the $$ amt of interest on the car is higher per month. Plus when I get the car paid off I can reduce the insurance which will save me more money to put toward the cc. Well that is my line of why I wanted to pay more to the car. I do pay extra on the cc also.

I assume you owe much more on the car than on the credit card. Paying towards the credit card will wipe that debt out sooner, resulting in more months where you don't owe ANY interest, thus saving you more in the long run.