Eliminating Debt, which loan to start with...?

Question

My husband and I have been trying to lower and eventually eliminate most of our debts. I have found a problem and need some opinions. Our home mortgage or our car loan--which do we work on eliminating first? Our home--currently owe $7,500 with 10.25% interest with 175min monthly pymnt. Our car--currently owe $8,300 with 7.990% interest and min monthly 292.
I keep getting different ideas from reading articles on the net about which is better to payoff first--pay your car off first so you won't be "upside down" if you decide to sell, payoff house first so you don't ever have to worry about foreclosure on your home, snowball debt, pay high interest first, etc, etc, etc.
We only have 1 credit card and we have been actively working to eliminate it and should do so by the end of this year. We will then have an extra 350 each month to put towards either home or car, suggestions??

Answer 1

You are in great shape. I wouldn't be overly concerned. as long as you continue to pay off debt, you cannot make too many mistakes here. Conventional wisdom says to pay off your car loan and credit cards first. The reason is simple. These are loans that are either unsecured or against property that declines in value. This is different than a house which generally holds or gains value. That's why some call mortgages good debt. If you are in a bind, you can always sell the asset and pay off the loan. You cannot do that with a credit card.

Is this home loan your only mortgage? Or is this a home equity loan or second mortgage? If it is your only mortgage, I would try to refinance it and get the rate as far down as you can. Here is an interesting strategy. If you can get a loan for 7% or even 8%, you can refinance and roll in your car loan and existing home loan. This will given you a single debt payment at a lower combined rate.

Answer 2

I would pay down the house first, that is the higher interest rate, in addition I would cut out a couple of coffee runs, etc. each month and add the extra 8$ to round the car to 300/month, it's only a little bit but it gets you in the habit.

Best of luck for a debt free future! And congrats on taking the steps to make it happen!

Answer 3

Since you only owe $7,500 on your house I'd pay that off first. It's true that financial guru Dave Ramsey suggests paying off the home mortgage last, but I think that's under the assumption that the mortgage is the biggest debt...which isn't the case here. Congratulations to you and your husband on taking steps to clear your debt. My wife and I did it and it sure feels good to have fewer bills each month. We paid the smallest debts first and then, as we paid them off, used the extra cash to pay off the bigger debts; similar to the plan you mentioned regarding your credit card payoff plan.

Answer 4

what is the APR on your credit card? I assume is the highest APR among the three loans. If so, you are on the right track on paying that off the credit card first before your car loan and the mortgage.

After you pay off the credit card, I would say you should pay off your Mortgage first before your car loan, just simply the interest rate is much higher than your car loan. Beside, it is lower balance, so once you pay it off, you will feel much progress on eliminating your debts. Then focus on your car loan....

Good luck!

Answer 5

credit card for sure. I think if i was that close to paying off my house. I would do it before the car. Like you said once its payed off its yours.

Either way i would say you'll be totally debt free within a yr depending on what you make.
Congratulations!!!!!

Answer 6

If you listen to Dave Ramsey, he will say to pay off your credit cards and car first, then your house. But, in this case, they are almost the same amounts, so I really think it is up to you. I would probably pay the car off first it it were me.

Answer 7

I say the home mortgage loan.

Answer 8

put it toward the home