2 different debts, one mortgage loan one a loan;which do I make extra payments to??

bateze

Hello All

What is the best way to work out to which loan I should make extra payments to...

I have one loan of £6017 to which I pay £180 p/m with an extra amount of £190p/m. The interest on this loan is 7.9% over 5 years.

My interest only mortgage is a £1090.28p/m to which I pay an extra £100p/m. The interest on this mortgage is 5.37% over 25 years.

The mortgage company make automatic adjustments to the capital owed (I asked them to do this) BUT the payment of £1090.28 will stay the same as they do not make adjustments unless the overpayment is more than £250.

I can continue to make the extra payments of £100p/m and ask them to make an adjustment every 3 months, or I can increase the amount to £250 a month which means taking from the £190p/m I make to the loan of £6017.

How do I work it out and which one would be more worthwhile?

Thank you!!

dimbo61

pay off the smaller loan first as you are paying a higher interest rate on that.
If you are allowed use the £100p/m that you are overpaying on your interest
only mortgage to help clear the £6017 asap.
Is the 5.37% rate for the whole 25 years ?
This is a very good rate so once you have cleared the other loan then start
overpaying the IO mortgage by the £250 a month and at the same time build
up savings in ISA,s which are currently paying 6/6.5% tax free
GOOD LUCK