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jkcooper00

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Which loan should I pay off first?
I have an auto loan with a balance of 6100 and a credit card with a balance of 2100. I have 5800 dollars to use to pay on these loans and I am unsure of which to pay first. Should I completely pay off my auto loan and slowly pay off my credit card for the next year? Or should I completely pay off my credit card and use the rest of the money towards my auto loan? I want to increase my credit score and save money at the same time.

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You don't mention which loan has the higher interest rate, so I'll assume the credit card does.

In that case, paying the credit card (mostly) off (see below) and just paying down the auto loan is absolutely the way to go because the cc is both the smallest loan and the highest interest loan -- thus satisfying both major schools of thought on which to pay first.

For real-life purposes, it's always wonderful to pay debt completely off. However, for scoring purposes it's nearly always best to leave at least a small balance -- 1% or more -- on the credit card. The scoring systems like to see us using our credit and taking utilization to zero often hurts our scores. So pay the cc nearly to zero, put the rest toward the auto loan, and be glad you have such a happy dilemma.

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