who to pay?

ruth2

I have a quick question; majority rules on this one so please cast your vote

I have a bonus coming next month; roughly £1500.

I am on an interest only mortgage (works for me), and am 'only' behind on my capital repayments by £3k at the moment. 20yrs to go.

I also owe maybe £5k on a car loan which has 3yrs left to go.


Where do you think the money should go?
I honestly cannot decide between long-term+short-term

Thank you!

opinions4u

Which one attracts the highest interest charge?

Assuming it's the car loan, will you actually save any interest by making a partial repayment? Many loans don't.

If the overpayment leads to lower monthly payments, make sure you use the freed up money to make further over-payments each month.

ruth2

The car loan is the higher of the two, and it's a bit of a strange setup. Early repayments reduce the term, which can reduce the interest (but indirectly, so it only affects interest if I push it over the threshold of something like £138). No fees associated with early repayment. So with over-repayments to date of ~£1k I've saved something like £27 on the car.

But I'm aware that even shaving 3p a month off my 20y mortgage is £7.20.

Not sure what's best?