mcarterbrown.com  

Money and Finance Because you have to save money to spend it on new paintball stuff!

Reply
 
Thread Tools
Old 01-03-2014, 07:04 PM   #1 (permalink)
Thrillin' Heroics
 
Marauder_Pilot's Avatar
 
Join Date: Jan 2007
Location: Whitehorse, Yukon

Loan or Line of Credit-which to pay off first?

I'm slowly working my way out of the financial hole I put myself in a few years ago-between school, unexpected job changes and a lot of stupid, irresponsible spending, I've amassed a loan of about $9,500 and a line of credit for around $10,000.

Fortunately, I've got my **** together a bit now, and I'm slowly chewing through both.

Right now, the line of credit stands at about $8500/$10000 and the loan at $3600/$9500. Monthly payment on the loan is about $235, and has 17 months left. Interest on the loan is 8.99, LOC is prime + 3% (About 6% right now).

My question is, assuming I want to keep my credit card empty, plus at least $1000 on the LOC for emergency expenses, should I put any extra money on the LOC or the bike loan? Straight math leads me to the bike loan-it's a higher interest rate, and getting a monthly payment off gives me a lot more financial freedom. However, from a credit score POV, I've always heard that keeping a loan open longer and always making the payment on time, and keeping any more liquid borrowing assets below 50% is better.

So, thoughts? Depending on how quickly I get working after school, I can either have the bike loan paid off before summer, if I dump all extra income on it, or I can leave it to carry out until next June and have the LOC paid off before the fall. Which method is the best bet?
__________________


Glory, glory, what a hell of a way to die,
With a rifle in your hands and you're falling through the sky,
Glory, glory, what a hell of a way to die,
He ain't gonna jump no more!

Quote:
Originally Posted by usagi_tetsu View Post
Nothing says "violent and insane" like sharpening a shotgun.
Marauder_Pilot is offline   Reply With Quote
Old 01-03-2014, 07:11 PM   #2 (permalink)
Big guy in a wig
 
The Flounder's Avatar
 
Join Date: Jan 2012
Location: Tucson, AZ

Fan of EMR
CCM Fan
Brass N Wood Fan
Palmers Fan
I would do the higher interest loan first. If your credit score is decent you are not going to hurt it too much by paying off a loan.
__________________
Quote:
Originally Posted by Mar View Post
...... next thing you know you'll be standing stark raving naked and blindfolded, with a paintball gun to your head.
Feedback
The Flounder is offline   Reply With Quote
Old 01-03-2014, 09:07 PM   #3 (permalink)
Post Whore
 
sniper97's Avatar
 
Join Date: Jul 2006

CCM Fan
Quote:
Originally Posted by The Flounder View Post
I would do the higher interest loan first. If your credit score is decent you are not going to hurt it too much by paying off a loan.
I agree, 2 things to look at:

1. highest interest rate

2. cash flow, sometimes paying off a loan with a small balance and a larger payment is better. Paying off the smaller loan will free up $235 that you can either save or apply to the LOC

What is the payment on the LOC?

Another option my be to payoff the bike and use the bike as collateral (depending on what it is worth) to pay off the LOC, assuming you can get a better rate.

IMHO, for the size of your loans, the difference in interest rates is pretty minimal.

What are your credit scores? If you are trying to build credit, what are you paying monthly besides the LOC and the bike. It may be a good idea to keep both.
__________________
Originally posted by heinous: "sniper's gun always gets extra camera love"
sniper97 is offline   Reply With Quote
Old 01-03-2014, 09:32 PM   #4 (permalink)
Active Member
 
Kanadian-Kaos's Avatar
 
Join Date: Jun 2008
Location: Kamloops, BC

Pay off the one with the highest interest rate first and make minimum payments (at the least, so you don't wreck your credit) on the other one.

Or, take $1500 more out of your line of credit (max it to $10,000), and put that towards the loan so you only have $2100 left to pay on it. Then pay off the Loan because it has the highest rate of interest and then tackle the line of credit.
Kanadian-Kaos is offline   Reply With Quote
Old 01-04-2014, 05:07 PM   #5 (permalink)
Igloo member
 
Eskimo's Avatar
 
Join Date: Jun 2011
Location: Ontario Canada

Quote:
Originally Posted by The Flounder View Post
I would do the higher interest loan first. If your credit score is decent you are not going to hurt it too much by paying off a loan.
Always pay off the highest interest first, makes life much easier.
Eskimo is offline   Reply With Quote
Old 01-04-2014, 05:22 PM   #6 (permalink)
MaD
MCB Member
 
MaD's Avatar
 
Join Date: Oct 2007
Location: A2, Michigan

The loan is both higher interest and a lower amount kill it first there's no reason to let it run to term.
__________________
Feedback

Quote:
Originally Posted by senghing27
ooops
Note: While I would love to take credit for his work, I am not associated with Mad Customs!
You can contact BigMatt-MadCustoms in his MCB forum
MaD is online now   Reply With Quote
Old 01-04-2014, 06:43 PM   #7 (permalink)
MCBs armed pacifist
 
Join Date: Jun 2009
Location: West Michigan

There are two ways to consider paying off loans. One of them makes sense financially and one of them gives you a psychological benefit.

The first is to pay off the highest interest loans first. Make min. payments on everything and direct any excess payments to the highest interest rate. In the long term paying less interest means you pay less money.

The second is to pay off the lowest debt first. This allows you to see progress more readily and keeps you psychologically on the program. As you pay off one debt you roll that payment into the next lowest one so by the time you get to the largest debt its the last one and you are making large payments on it. This is, I believe, the basis of Dave Ramsey's debt snowball.

If you are going to succeed the first makes most sense. If you question your ability to stay with your plan the second seems to give the most motivation. In your case its a moot point because the highest interest rate is also the smallest balance. Pay it off first.
__________________
"The Truth is the same no matter under what name it is taught, or who teaches it. Strip it of the personal coloring of the teacher and it is seen to be the same--THE TRUTH" - William Walker Atkinson

"Use peaceful means where they are appropriate; but where they are not appropriate, do not hesitate to resort to more forceful - Thupten Gyatso (the Dalai Lama, 1932)

"It is not the will to win that matters - everyone has that. It's the will to prepare to win that matters" Coach Paul 'Bear' Bryant.

"The ink of scholars is more precious than the blood of martyrs" - Muhammed
Lohman446 is offline   Reply With Quote
Old 01-04-2014, 07:30 PM   #8 (permalink)
Slowly making progress
 
desertT1's Avatar
 
Join Date: Apr 2008
Location: Vail, AZ

Loh is right about the snowball. How much are you putting into payments per month?
__________________
>>> Link to prototype Dust Devil<<<

DT1 Dust Devil want list. Click me!
Quote:
Originally Posted by neftaly View Post
New advertising tagline: "Simon Stevens said that will be totally fine and nothing bad could ever happen. Ever."
Feedback
desertT1 is offline   Reply With Quote
Old 01-04-2014, 08:52 PM   #9 (permalink)
Happy and homeless
 
sparky's Avatar
 
Join Date: Apr 2006
Location: Alberta Canada
Send a message via Skype™ to sparky

Pay off the line of Credit. I am assuming that the Loan has a fixed value and regardless if you pay it off faster or not it will still cost you the same in the end.

One very good option is sell the bike and put it money on one of the debts. It's only going down in value anyway being a vehicle/toy.
__________________
Quote:
Originally Posted by heinous View Post
we're talking about camping, not being homeless
Vagabond living on the side of the road in East Asia.
sparky is offline   Reply With Quote
Reply

  mcarterbrown.com » General » Off-Topic » Money and Finance

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are On

Forum Jump


All times are GMT -4. The time now is 01:50 AM.


Powered by vBulletin® Version 3.8.6
Copyright ©2000 - 2015, Jelsoft Enterprises Ltd.
Search Engine Optimization by vBSEO
© MCB Network LLC