Windfall - pay off which debt? Mortgage or other debts

[Elish McDonnell]

I am due to receive a lump sum payment should I pay off some of my mortgage or pay off credit card/credit union loans?

 

[Protocol]

Pay off more expensive debt first, obviously.

CC debt is most expensive, at 15-20%

CU loan would be 6-10% maybe???

 

[Lightning]

Exactly, the higher the rate on the debt the sooner it should be paid off.

 

[Brendan Burgess]

If you are in arrears on any loan, pay them off first.

CC debt is most expensive, at 15-20%

CU loan would be 6-10% maybe???

The real rate on the credit union is likely to be a lot higher

Brendan

 

[Elish McDonnell]

Pay off more expensive debt first, obviously.

CC debt is most expensive, at 15-20%

CU loan would be 6-10% maybe???

Makes sense. thank you

If you are in arrears on any loan, pay them off first.



The real rate on the credit union is likely to be a lot higher

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Brendan

thank you for the advice.

 

[Waver]

It depends on your situation.

If you are in arrears in your mortgage deal with that first.

 

[DingDing]

I would get a amortization spreadsheet and set it up for each of your loans. It is not as straightforward as looking at the rate of interest. The duration of the loan is also important.

If you had a car loan with 3 years left you would only save 3 years interest, while if you had 20 years left on your mortgage you would save 20 years interest on any money you take off it.

This could considerably shorten the term of the mortgage. This also has to be balanced with your income and commitments you have that will cause you trouble to meet.

http://www.vertex42.com/ExcelTemplates/loan-amortization-schedule.html

This one allows you to put in additional payments and work out the savings. It would be worth spending a couple of hours working through all the scenarios.