Home     Forum     401k     401k Rollovers     Crypto Forum
    Register   Login   Members   Search   FAQs     Recent Posts    



Use tax credit to pay off car loan or put towards mortgage?

Reply to topic
Money Talk > Credit & Loans

Author Thread
hlewis11
New Poster


Cash: $ 0.45

Posts: 2
Joined: 31 Oct 2008
Location: Wisconsin
Use tax credit to pay off car loan or put towards mortgage?  Reply with quote  

We just bought our first home and qualify for the 1st time home buyer's tax credit of $7,500. Should we pay off our only car loan or put the money towards the principal of the mortgage? The car loan interest is quite a bit higher than the mortgage interest rate.
Post Fri Oct 31, 2008 8:15 pm
 View user's profile Send private message
hlewis11
New Poster


Cash: $ 0.45

Posts: 2
Joined: 31 Oct 2008
Location: Wisconsin
Pay off car loan or put money towards mortgage  Reply with quote  

Tim -

Can you explain why you'd pay off the car loan? My fiance thinks it would be better to put the money towards the mortgage but I disagree.

Thanks!
Post Sun Nov 02, 2008 12:12 am
 View user's profile Send private message
jweschman
Member


Cash: $ 2.20

Posts: 11
Joined: 08 Feb 2008
Location: Houston, TX
 Reply with quote  

First -- make sure you have an adequate emergency fund (3-6 months ordinary living expenses is the "standard" recommendation).

Then -- Pay off the car loan. Besides getting rid of the most expensive debt first, as Tim says, this has the advantage of actually *eliminating* one of your current monthly obligations.

Now you can take that extra monthly cash flow you just freed up, and put it towards either retirement savings (Roth IRA if you qualify, increased 401k contributions or traditional IRA if Roth isn't an option) or making periodic extra mortgage payments. If you can do this right away, and preferably make it automatic, you'll avoid the usual trap... which is letting your lifestyle "expand" to absorb the extra monthly cash.
Post Thu Nov 13, 2008 7:53 pm
 View user's profile Send private message

Reply to topic
Forum Jump:
Jump to:  
  Display posts from previous:      


Money Talk © 2003-2022

Crypto Prices