pay off which loan first

sewecae

This might be as obvious as pay the highest rate first….
i have been overpaying on my mortgage by £500 each month. This overpayment has been built up and totals over £30,000 reducing my mortgage to around £130,000. The overpayment can be withdrawn without penalty. I also have a business loan and 2 car loans. My business loan is around £27,000 and the car loans £15-20,000 each. The interest rates are: mortgage 2.5%, business loan 4.5%, car loans 4%. As the mortgage is the lowest rate should i withdraw some of my overpayments to pay off loans with higher rates? I am a higher rate tax payer so get tax relief on the business loan.

[Deleted User]

are those figures for business and car loans the outstanding amounts?

sewecae

Yes, more or less current balances

Herzlos

Generally highest interest first, if you're disciplined enough to feed the savings into the other ones.

Otherwise the mortgage as it's secured and longest term (compound interest and all that).

Tixy

As the car loans are most expensive then I'd pay off one of those in full with some of your overpayments.

The assuming the remaining one allows partial overpayments I'd put the saved repayments from the first one, and the extra £500 a month towards the next car loan.

In 6months ish when both car loans are cleared I'd probably go back to putting the additional payments to the mortgage.

Whilst the mortgage rate is slightly cheaper than the business loan (after tax relief) as there is little difference in the numbers I'd probably focus on the mortgage as it has the benefit of allowing you to re-borrow the money if required.

andyfromotley

Does the business loan have any advantage to paying it off early? I was reading another thread where a business loan had to be repaid with all of the interest as that loan had different T&C's to a personal loan.

Other than that the loans are all so similar in APR's there will be little real gain in the scheme of things i suspect.