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Posted in Auto Loans
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Question By
Wyndryder

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Is it better to put a larger down payment on a car or use the funds to pay down credit cards?
I have some cash available over the 10% I know I'll need to put down on a new car. Would it be better to use the excess cash to pay down credit cards and improve my credit utilization or put it on the car loan and have a lower car payment?

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Payoff he credit cards

Helpful to 2 out of 2 people

If your fico is in the 700s you can get away with no down. This frees up all your down to pay on those pesky credit cards. But if your fico is in the 500s you may need more than 10% cash down and you will have no money left over for your credit cards. So assuming your fico is around 620 to 660. I would negotiate for the smallest cash down on the car and make paying down the credit cards as a priority. Why? Because typically a car loan rate will be lower than a credit card rate. You also improve your credit card utilization ratio. Granted your car payment may be a little higher, but that is more than offset by wiping out all that high credit card debt. Just remember......it's up to you to make sure you don't rack up all he available credit you will have.

Reply by
Wyndryder

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Thank you.  That is what I suspected.  I also have a trade in with equity so that will help also.

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