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Which option makes the most financial sense?

New Contributor

Which option makes the most financial sense?

We have 2 cars - one paid off and one that we still owe about $13k on  @ 1.9% interest.  The one that was paid off was just totalled and the insurance has cut us a check for $10k.  We have to purchase a new car.  The interest rate for the new car will be about 4%.  I have some credit card debt that is roughly 21% interest.  My question is should I take the car settlement payment of $10k and pay down one of the two cars or should I pay the $10k car money towards the high interest credit card debt? 

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6 REPLIES
Valued Contributor

Re: Which option makes the most financial sense?

My opinion is to get the car at 4% and pay down the credit card -- it iscosting you the most money. Are you planning on applying for financing on any other major purchases any time soon, besides, of course, the car at 4%?



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Message 2 of 7
New Contributor

Re: Which option makes the most financial sense?

No  - but then again didn't plan on this major purchase either.   I have no negative items on my credit - just high balances.  Otherwise I would be able to get a lower rate on the new vehicle.

Message 3 of 7
Valued Contributor

Re: Which option makes the most financial sense?

I would agree with idea use the money from insurance company to pay down the credit card debit. I think it would save you the most money in the long run.

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Established Contributor

Re: Which option makes the most financial sense?

If you can get by without the second vehicle, it would make sense to put some monies down on the highest cc, and if you do not have an emergency fund, put  a grand or so away for emergencies.

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Message 5 of 7
Established Contributor

Re: Which option makes the most financial sense?

Definitely pay off the credit card.

 

How much CC debt will that leave you with? If alot, maybe try a less expensive car and pay the difference on the CC debt, just a budgeting suggestion. Good luck!

 

 

 

 

Message 6 of 7
Frequent Contributor

Re: Which option makes the most financial sense?

Pay off cc debt, pay cash for car.
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