Opinions please?

[fgms]

I would like some opinions on some debt and how to go about repaying it-

A. Truck payment of $530.00 month and have 23 months left on it.
B. Home equity line of credit- $25,000- not sure aboout the min. payment, but can pay about $600Plus a month on it

Now, should I pay off the truck payment 1st by using the payment for credit line and just pay the minimum on the line? or should I just pay the truck payment for another 2 years and pay what I can on the line? I also intend to use some of our tax refund to pay down one of these also. Suggetions?

 

[disneysteve]

should I pay off the truck payment 1st by using the payment for credit line and just pay the minimum on the line? or should I just pay the truck payment for another 2 years and pay what I can on the line?

You should pay above the minimum on whichever loan has the higher interest rate and just the scheduled payment on the other. When figuring that out, don't forget to account for the tax deductibility of the HELOC. Unless you got one of those special promotions on the truck, that is probably the loan that should go first.

And the tax refund money should also go toward the loan with the higher interest rate.

 

[fgms]

they have the same interest rate

 

[disneysteve]

they have the same interest rate

Before or after you figure in the tax deduction?
If they have the same rate after figuring in the deduction, that's quite a coincidence.
In that case, is the HELOC rate fixed or variable? If it is variable, then it is most likely on its way up, whereas the truck loan is fixed, so I'd put the extra payments toward the HELOC and just make the scheduled payments on the truck.

 

[fgms]

No, that is not taking into consideration the tax deduction.

 

[minnie1928]

Then go for the truck first, once you factor in your tax rate you'll find that the HELOC rate is actually lower than the truck.

Good luck!

 

[disneysteve]

Then go for the truck first, once you factor in your tax rate you'll find that the HELOC rate is actually lower than the truck.

Good luck!

I agree. The best strategy financially is always to prepay the loan with the highest interest rate as that saves you the most money. (Dave Ramsey devotees will disagree but his method is based on psychology, not finance.)

If, at some point, the interest rate on the HELOC climbs to where it exceeds the truck loan, then switch the extra payments to that.