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Should I pay off my car loan or student loan first?
I have a car loan for a vehicle I got when I started college. Now that I graduated, I have $50,000 in student loans. My car loan is only $9,000. Which should I pay off first?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Congrats on graduating from college! Unfortunately, the reality of adulthood has already firmly struck you.
The true answer to your question lies in what interest rates you’re paying and whether or not you have private or federal student loans.
If you have a private student loan, you may want to focus on it first. Private student loans aren’t nearly as flexible as federal student loans, and they often carry interest rates that may be higher than your car loan.
If you have federal student loans, paying your car loan first is probably the better option. Federal student loans have more flexible payment options, and you can usually push off paying them for extended periods of time.
However, the old-school and perhaps most feasible approach is to pay off whatever loan has the higher interest rate. If your
car loan
has a 12% interest rate and your student loan is only 6%, you’d save more money by paying the car loan off first.Whichever you decide to pay first, you can always save money by shopping around for car insurance. Using the
Jerry
app, you can compare rates from over 50 car insurance companies and put that money toward something fun (or toward your student loans). View full answer
- Gregory R.
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