Financial Information
I have $2500 I can use to reduce debt. I can pay off my car in full or pay half my credit card balance?
Question : I have 00 I can use to reduce debt. I can pay off my car in full or pay half my credit card balance?
Which is best for my credit score. I am looking to buy a house in the summer
reduce my debt
Best answer:
Answer by Gorkbark Porkduke Gefunken Fubar
Pay off the credit cards. This is revolving debt and to pay it down is better for your credit score than paying off installment debt, such as a car loan. Also, the interest on the credit cards is higher, so it makes sense to get rid of that first.
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#3 written by MyOpinion 1 year ago
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#4 written by Tracy H 1 year ago
It’s funny that everyone automatically says pay of the credit card, what we don’t know is how you are with money. I would tell you to pay the car off, why because if your someone that has little willpower when it comes to spending and using a credit card, paying the credit card off will only encourage you to rack it back up. If it were me, I’d pay the card off, take the payment I was making every month on the car, put 1/2 in savings and apply the other 1/2 to the credit card each month in addition to the amount you are currently paying. If you really want a home, you will find additional income to pay the credit card debt sooner.
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#5 written by stan c 1 year ago
Why pay on the credit card? Put the money away and just pay 10% per month on the credit cards so in about 12 months, you’ll be debit free. If you fear you’ll use the credit cards once they are paid off, then cancel them. You’ll sleep better at night. If you’re half way though on your car loan, you already paid 70% of the interest. That’s how most banks or finance cos make their money
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#7 written by Dark Green Money 1 year ago
Step 1: Put $ 1000 in your sock drawer.
Now you can weather any small storm on the horizon.Step 2: Pay the next $ 1500 towards the car. You’re close to payoff. Once it’s gone, you’ll be in a better cashflow position.
Step 3: Go crazy on the credit card. Throw your old monthly used-to-be-a-car-payment at it. And repeat whatever you did to get this $ 2500 in your hands.
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#8 written by rhonda 1 year ago
pay off the car if there is no penalty, then pay the card more each month as much as you can! you can go from full coverage to liability, saving you a lot of money, just dont hit anyone! (lol) it leaves you with one less payment a month and more money each month, hopefully you use that cash to buy things rather than put things on your card. if you pay on the card, what are the odds you will just charge more and be right back where you are now??!! pay off the car! and use that money wisely! PS: your score is based in part on your total debt.having one less payment (car) is better than having 2 debts, one that goes down, and another that can go up! the credit card if payed on, (2500) still can go up if you use it. the car payment is gone! pay off the car, then pay what you can on the card. It will help if you get some of that car payment money back in a savings account! (larger downpayment on your house) lower loan!
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#11 written by Dan B 1 year ago
It won’t matter for your credit score, really. Paying half of your credit card won’t be recorded in your credit profile. Only if you are late or when you finally pay it off will it be recorded. Advance payments don’t earn points.
Everyone says that you should apply it to your credit card, and they may be correct. Before I would do that, I would look at paying off the car in full then taking the car payment AND the credit card payment, add them together and work on paying off the credit card.
There are a lot of unknowns in your situation. What are your terms on the car loan and the credit card.
If you pay $ 2500 to your credit card, you’ll still have $ 2500 left to pay off. If your monthly payment is $ 150, you’ll still have 20 months to go before your card is paid off. Remember your entire $ 150 payment does not go toward the principal – a lot goes toward interest. And your car payment will continue for another 8.5 months. I’m presuming that your original CC balance is $ 5000 and your monthly payment is 3% ($ 150) of that balance.
Pay off your car and apply the car payment AND the $ 150 credit card payment, you’ll have the credit card paid off in 6 months. OR save the $ 300/mo to use for your home purchase.
You’ll have to do a more thorough analysis of your situation to see what the interest savings will be.
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#13 written by bdancer222 1 year ago
Pay off the credit card. The interest rate is probably highest on the credit card. Also, carrying balances on credit cards can negatively impact your score if your credit card debt to limit ratio is more than 30%. Paying off the balance can give your score a boost.
Paying off a car installment loan early won’t help your score at all. Installment loans are a different category and build your credit by making the payments over time.
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#14 written by SPIFIMAN1 1 year ago
Simple, pay off as much of your credit card debt as you can for several reasons.
First your debt to credit ratio makes up a full 30% of your score so the lower your credit card balances are the higher your score will be.
Second in most all cases credit card interest rates are higher then car loans so in the long run you will save money.
Third since your looking to buy a home the lower your credit card debt is the better your credit profile is going to look to the lenders.
Good luck.
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#17 written by Laura-belle 1 year ago
i would pay on the credit card. simply because it’s unsecured debt. your car loan is secure as your vehicle is the collateral. the only exception would be if for some reason your car loan apr was actually higher than your credit card’s. rule of thumb when paying down debt… pay off unsecured 1st and in order of highest interest paid. good luck with your home purchase.
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#18 written by RichardL 1 year ago
I’m assuming your car payment is higher than your CC payment and that you have your down payment for your home all squared away. If that’s the case and you can still qualify for the mortgage (and feel you can handle both the mortgage and the car payment at the same time), then by all means pay the CC off. If making the mortgage and the car payment is going to be hard, then you might consider paying off the car and then work on paying off the CC over time. You’ll pay more interest this way, but it’s better to pay a little more interest than get yourself into a financial situation where your car and house payments are not being made.
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Pay down your cc’s, but save enough for an emergency.