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Pay off credit card or car

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AdPray123
New Contributor

Pay off credit card or car

Hi Guys,

 

I am in the process of trying to pay off debt. I have a credit card that has a $8500 balance that has zero interest until mid Feb. I owe about $6500.00 on my car. What I have been advised to do is pay off the smaller debts first to create momentum in getting out of debt but also want to know which one will help my credit score more? Paying down as much as possible on the credit card or the car? Thank you for your time.

Message 1 of 14
13 REPLIES 13
Creditaddict
Legendary Contributor

Re: Pay off credit card or car


@AdPray123 wrote:

Hi Guys,

 

I am in the process of trying to pay off debt. I have a credit card that has a $8500 balance that has zero interest until mid Feb. I owe about $6500.00 on my car. What I have been advised to do is pay off the smaller debts first to create momentum in getting out of debt but also want to know which one will help my credit score more? Paying down as much as possible on the credit card or the car? Thank you for your time.


Pay Credit Card off before Car because it is an installment debt and is not nearly effecting your score as much...

Now I might give different advice if you say your going to have both paid off in 6 months or less and your auto loan is like 15% or something

Message 2 of 14
Hightechredneck
Frequent Contributor

Re: Pay off credit card or car

+1 absolutely, pay the card off first, it will have more influence on your CS. I put a huge downpayment on a truck using a CC and man did my score drop. Almost paid off now and my scores are recovering

Message 3 of 14
sccredit
Valued Contributor

Re: Pay off credit card or car

What is the interest rate on the auto loan?

Message 4 of 14
k-s
Regular Contributor

Re: Pay off credit card or car


@AdPray123 wrote:

Hi Guys,

 

I am in the process of trying to pay off debt. I have a credit card that has a $8500 balance that has zero interest until mid Feb. I owe about $6500.00 on my car. What I have been advised to do is pay off the smaller debts first to create momentum in getting out of debt but also want to know which one will help my credit score more? Paying down as much as possible on the credit card or the car? Thank you for your time.


You have to ask yourself an important question before deciding. Do you care more about saving money or improving your score? Unless you're planning to apply for a new car loan or a mortgage, what's the point in improving your score a few points? I would absolutely go the route that saves you the most money in interest unless you are applying for any big loans in the near future.

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Message 5 of 14
oscar_actuary
Frequent Contributor

Re: Pay off credit card or car

Sell your car.

Pay off debts sooner.

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Message 6 of 14
mountainmom
Frequent Contributor

Re: Pay off credit card or car

What is rate on car?
I was recently able to get my car loan from 5.99 to 1.99. So refi with a credit union might be a good option, let you save some interest. Bonus is they used the same hard pull to give me a 5k credit card too!


Eq 702 TU 707 Exp 718
Message 7 of 14
AdPray123
New Contributor

Re: Pay off credit card or car

Thank you everyone. The interest rate on my car is 6.9%. After mid Feb, the interest rate on my credit card will be 15.9%. I won't be applying for anything for another year and a half or 2 so you guys are right, the credit score is not really an issue. In the long run it seems I need to put a dent in my credit card before the zero interest runs out. Cause then I will have similar balances and spend more money on the credit card. Do I have that right?

Message 8 of 14
longtimelurker
Epic Contributor

Re: Pay off credit card or car

Yes, you need to get that balance down before the APR kicks in.   So the question is how much you can pay.   Any money you pay now towards the card rather than the car is incurring extra interest costs (because the car has interest and the card doesn't) but unless you can all/nearly all of the card before Feb, I would put most of the payments towards that now.

Message 9 of 14
user5387
Valued Contributor

Re: Pay off credit card or car

In general an auto loan is considered more "normal" than credit card debt.  The same is true for mortgages.

 

You may not be concerned for your scores in the short term, but carrying a balance on a card makes you more vulnerable to creditors.

 

Message 10 of 14
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