Which should be paid first?

smiffy

This might be a stupid question, but I just can't get my head around this at present.

If I have a personal loan with 4yrs to go at 4.9% APR, and a mortgage with say 12yrs to go at an interest rate of 2%

The car loan as it's a high rate, or the mortgage as it's a longer term - though at a lower rate?

Which should I make overpayments to first?

amnblog

£100 X 4.9% x 4 = £19.60


v


£100 X 2% x 12 = £24.00

TrickyDicky101

The one with the higher rate as it will save you more interest.

smiffy

The Mortgage 2% isn't APR so does that make a difference?

TrickyDicky101

Not a significant one, no.

EDIT: this assumes it is 2% annualised nominal rate which is an effective annual rate of 2.02% (this is the APR of the mortgage without accounting for any fees)

smiffy

Thanks - that was much simpler then I thought.

EDIT: However, if I use an online loan calculator for my £100 over 4yrs at 4.9% the interest cost is only £10.09 over the 4yr period - not the £19.60

Is this because there is no accounting for the capital part of the conventional loan vs the mortgage interest only calculation?