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Is it better to pay down credit cards (reduce util) or use the money for a bigger down payment?

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Anonymous
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Is it better to pay down credit cards (reduce util) or use the money for a bigger down payment?

Scores in the mid-600s.

Message 1 of 4
3 REPLIES 3
Pway
Valued Contributor

Re: Is it better to pay down credit cards (reduce util) or use the money for a bigger down payment?


@Anonymous wrote:

Scores in the mid-600s.


My personal opinion I say pay down those balances with that down payment money.  Some others on here will disagree but use that money to pay down those balances. 

Thank you for the wealth of knowledge I have learned from these forums. I am logging off as of November 9, 2022. I wish everyone great success.
Message 2 of 4
redbeard
Frequent Contributor

Re: Is it better to pay down credit cards (reduce util) or use the money for a bigger down payment?

It depends.
What is your current utilization? How much will it drop?

Will the bigger downpayment make a difference in the auto loan interest rate?

Since the credit card interest is probably (much) higher than the auto loan interest, given a choice, its probably better to pay down the credit cards then the car loan, regardless of utilization.

But, then it comes down to cash flow and affording payments on everything.

Dan
Just trying to get my scores to rise from the dead......

Wait.... I think I just heard a heartbeat!

Message 3 of 4
jim44
Established Contributor

Re: Is it better to pay down credit cards (reduce util) or use the money for a bigger down payment?


@redbeard wrote:
It depends.
What is your current utilization? How much will it drop?

Will the bigger downpayment make a difference in the auto loan interest rate?

Since the credit card interest is probably (much) higher than the auto loan interest, given a choice, its probably better to pay down the credit cards then the car loan, regardless of utilization.

But, then it comes down to cash flow and affording payments on everything.

Dan

Good points, DTI always comes into play. Also consider the year of the car you're buying.  That and mileage can play a part in the APR.  Strong down payments mean shorter terms and you can start out with that much more equity in the car itself.   Good questions OP! 

Message 4 of 4
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