I have a personal loan with 3 years left on it. It is a variable rate at 6.8% so i can pay a lump sum whenever I want.
I also have a mortgage that is fixed rate at 3%. I rang the bank and they said there is no fee today for paying a lump sum.
I am trying to decide what to do. I used a savings calculator and If i pay 2500 off the loan, I save 300 euro in interest payments. If i pay 2500 off the mortgage I save 2600 in interest payments. So it sounds to me like I will save a lot more money if I pay off the mortgage. I always see advice that says to pay off the higher-interest loans first but I don't understand why. I will pay a lot less interest if I pay a lump sum off my mortgage instead of the personal loan. It seems like my 2500 euro put toward the mortgage will have a much higher return in the long run.
I also have a mortgage that is fixed rate at 3%. I rang the bank and they said there is no fee today for paying a lump sum.
I am trying to decide what to do. I used a savings calculator and If i pay 2500 off the loan, I save 300 euro in interest payments. If i pay 2500 off the mortgage I save 2600 in interest payments. So it sounds to me like I will save a lot more money if I pay off the mortgage. I always see advice that says to pay off the higher-interest loans first but I don't understand why. I will pay a lot less interest if I pay a lump sum off my mortgage instead of the personal loan. It seems like my 2500 euro put toward the mortgage will have a much higher return in the long run.