What would be better to do pay off credit card debt or vehicle debt?
Hmmm asked:
My husband and i would like to sell our place and buy another place,however our debt income ratio is too high right now.
What would be better to pay off to lower our debt to help us move. Would it be better to pay off all our credit card / loan debt or one of our vehicles?
all our credit card/loan debt equals to around $10,000 and our vehicle is about $25,000
My husband and i would like to sell our place and buy another place,however our debt income ratio is too high right now.
What would be better to pay off to lower our debt to help us move. Would it be better to pay off all our credit card / loan debt or one of our vehicles?
all our credit card/loan debt equals to around $10,000 and our vehicle is about $25,000
Thank you all for your help
i should also add that our credit card interest rate on everything is 19.9 % and up and our vehicle interest rate is 15%
April 10th, 2010 at 5:51 pm
Credit card debt is unsecured and (typically) has much higher interest rates. Pay those off first since they take the biggest hit on your credit scores. A vehicle loan is a different animal from credit cards and scored differently.
April 10th, 2010 at 11:36 pm
As mentioned – it’s best to pay off the higher interest as it would cost you more money that you otherwise wouldn’t pay.
I’m a little confused however – do you have enough to pay off the full amount of the car? if you do, then maybe fully paying off the car would be your best bet to get that new house. no car payments = bigger repayments on your credit card AND your debt to income ratio will change more significantly.
You also have to understand that debt – does not mean you will have a low credit score. Missing a payment does however lower it.
Maybe holding off on a another house and upgrading your current one may be a better option for the time being. Let the market come up a little, and have a better valued place to sell may work in your favor.
Best of luck!
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