Credit Card or Car Loan

[disneysteve]

OP, I have a different but related question. How much of a down payment will you have saved by the time you are ready to buy? If it is less than 20%, it might make more sense to forget paying extra to debt and instead use the tax refund to boost the down payment. That might save you more money in the long run by giving you a lower monthly mortgage payment and possibly avoiding PMI.

 

[Golf4food]

We want to buy before July 2009 to get that First Time Home Buyer Tax Credit.

You mean the first time home buyer loan - it has to be paid back. They tout it as free money but it is not. No interest, but still must be repaid. That said, we are building but currently own a home and are not eligible, but if I were and they wanted to give me a $7,500 interest free loan I'd take it!

Regardless of what you choose to pay off, step #1 should be going into your work HR office and changing your W-4 withholding so you stop getting a big refund back, have more in your paycheck each month, and use that extra to pay down any other debt NOW instead of waiting 12 months giving the government an interest free loan on your tax money while you keep on paying more interest on your debt!

 

[disneysteve]

You mean the first time home buyer loan - it has to be paid back.

Yes, I was going to say that, too. It is a loan, not a tax credit (even though they call it that). So don't forget to factor that repayment into your budget.

 

[natale1980]

We are looking to put 5% down. So saving the money for the down payment wouldn't help. We still would not be close to 20%.

I meant loan. But you pay it back over 15 years at 0% interest! So I will gladly take it!

The W-4 with holdings is something I have been thinking about. Right now we claim zero. We like the 'bonus' at the end of the year.
I'm starting to think we need it now. But we don't want to end up owing money at the end of the year.


-nat

 

[disneysteve]

We are looking to put 5% down. So saving the money for the down payment wouldn't help.

The W-4 with holdings is something I have been thinking about.
We like the 'bonus' at the end of the year.
I'm starting to think we need it now. But we don't want to end up owing money at the end of the year.

A larger down payment always helps because it allows you to borrow less, thus having a lower monthly payment for the next 30 years.

Getting anything more than a small tax refund is a bad idea. You can go to irs.gov and use their calculator to figure out what you should be claiming. You can always withhold a little extra to avoid owing in April.

 

[gilby]

I feel you should pay off the car loan and once you pay the car loan, use the350.00 you spent on the car loan and pay it on your cc, instead of paying 100 a month you would be paying 450.00 therefore you will pay off the cc faster. It is important to stick to paying the 350.00 on the cc and not spend it elsewhere. We have always paid our loans off early.