Comments on: Pay off your car loan before other debts?

By: mbhunter

mbhunter — Sun, 03 Jan 2010 03:10:32 +0000

Good job paying off the car loan Bucksome!

By: Bucksome

Bucksome — Sat, 02 Jan 2010 13:59:55 +0000

My car loan was what I focused on paying off first because it was the lowest amount (a la Dave Ramsey). Just retired it in December (woo hoo).

I think if you’re the budget is that strapped then paying the car off first makes sense. It’s probably the only secured debt (other than a mortgage).

By: mbhunter

mbhunter — Sun, 27 Dec 2009 15:31:52 +0000

@LeanLifeCoach: If that’s possible, sure. But if you’re already upside-down on the car loan (likely) then upon selling the car you’d need to make up the difference to have the lien released.

@Dr Dean: True. I think the main “spin” I was going for (and Liz Weston as well) was that some loans have a shorter fuse on them. If you miss your car payment by even one day, your car can be repossessed. Bad things can happen with a student loan, but it takes months, not days.

By: Alex Harrison

Alex Harrison — Sun, 27 Dec 2009 11:39:01 +0000

I always advise the same – you should always pay off the debt with the lowest balance first because when you do, it will make you feel like you are really making progress as opposed to the bigger debts where it can take years to make any impression on the balance.
Nice article.

By: LeanLifeCoach

LeanLifeCoach — Sun, 27 Dec 2009 00:32:58 +0000

mbhunter – thanks for showing the variety of options. Goes to show you are genuinely trying to help your readers.

However if things are so tight that you find yourself weighing your car note against your financial survival wouldn’t you seriously consider dumping the car and the note for a clunker that you can pay cash for?

By: Dr Dean

Dr Dean — Sat, 26 Dec 2009 21:19:17 +0000

Great description of options.
I would only make the point that student loan debt collection, especially the fed. program, has the ability to do things that can really hurt, ie holding tax refunds, that only the federal government can do. So best to use the hardship deferral option rather than just not paying, if at all possible, when dealing with those loans.

By: Jason @ MyMoneyMinute

Jason @ MyMoneyMinute — Sat, 26 Dec 2009 20:23:10 +0000

I think quick wins are of utmost importance not only for the psychogical advantage of quick wins, but also to establish and develop good debt-reduction behavior.

To me, I would only consider moving up a car payment in my debt snowball after a few quick wins with my lower balances. And the reason I would do it would have nothing to do with how fast it could be repo’d. Rather, eliminating a car payment usually frees up more money each month to add to your snowball than other debts would, and reduces the amount of minimum payments you have to come up with each month.