If you have 2k in your savings account, is it better to pay off a credit card or apply it to a 16k auto loan?

Question

Which will save me more money and interest?

Answer 1

You indicate the 2k will kill the credit card debt. If so, get rid of it. Basically pay off all you can and apply those payments to your other debts. If you go smallest to largest, you'll enjoy paying thing off instead of worrying about paying off by interest rates. The interest savings will be very small and you'll be eliminating debt along the way.

Pay off smallest to largest worked for me, I always got tired of trying when just looking a interest rates because I never got anything payed off. Small victories are great motivators.

Answer 2

If you pay off a credit card which bears a higher interest rate than the auto loan, then you'll have higher interest savings. But then after doing that, there's probably the tendency of using your card again on a series of future purchases amounting to 2K.

So, perhaps you may opt to apply it to your auto loan, enjoy lower interests on the short term, but bigger savings on the long term provided you gradually pay off your credit card.

Answer 3

If you qualify for a decent rate on the car loan, pay off the credit card. Most car loans are under 10%, and dealer financing can even be 5% or less for a new vehicle. Most credit cards are 18 to 22%

Answer 4

Most credit cards have interest rates of 18-22%; interest rates on auto loans are typically lower (7-12%) because it's secured debt. Definitely pay off the credit cards first!! But keep at it, use the funds you usually pay to the credit card to help tackle your next largest debt.

Answer 5

Well, I would hold off and just make payments to both but if it is not an issue to keep the money I would pay off the credit card you are probably getting a 25% or more on interest and late fees.

Answer 6

Assuming your auto loan's interest rate is lower than your CC's, I'd be paying down that credit card first.

Answer 7

Credit card for sure. The interest in the car loan is figured differently. Pay off the cc and then pay the additional to the car. If you normal cc payment would be $50 - then add $50 to your car payment.

Answer 8

Depends on the interest rate, but more than likely the credit cards would be higher rate and thus, more pressing to pay off.

Also, you have the added benefit, of once you paid off the card, you could use the money that you would have been still paying to add to your usual payment to your car.

Answer 9

It's better to save it, and pay off your loans a bit with each paycheck. If you can get extra work or overtime, that's even better. Another thing you might consider is trying to consolidate both loans at a lower interest rate. Then quit using your credit cards until you're debt free.

If you continue to save a little bit out of each paycheck for yourself (10% is very reasonable), then when you have paid off your debts you will find that you have a nice lump of cash in savings--which I would recommend investing, rather than celebrating with. You will also have learned the discipline of saving a portion of your income, which will probably help make you financially wiser, and certainly wealthier.

I suppose you could take the advice of others, and apply every last extra penny to your debts--but consider carefully. Few people who have managed to dig themselves into financial holes have the discipline to continue slavishly working for their money lenders. Typically, they will fall back into their old spending habits long before their debts are paid. And even if they manage to tough it out until their last payment, they have nothing but a clean financial slate to show for it, and have not taught themselves--trained themselves--to save for the future.

Answer 10

Pay off your debts first.
Why would you keep your credit card debt and add a new debt in the car ? Digging a hole deeper for yourself.