Overhaulin'

I have two car loans and would like to put money down towards one of them. Which one should I choose?

I have two car loans with the same interest rate 5.65%. One loan is 10,281 and the other one is a new car loan at 22,525 that's with taxes included. I plan to put 6,000 down towards one of the loans. Do I put the money on the lower one to pay it off sooner or refinance the new one and decrease the taxes and interest paid over the life of the loan. It doesn't cost anything to refinance with my credit union, so there are no fees involved. Im having a hard time determining which way is more cost effective.

Public Comments

1. In my experience, I find it better to pay off whatever you can sooner. That way, once you pay it off, you can put what you save from paying on that one to paying more on the other.
2. What about doing both. Personally I would try to pay the lower one off first then you can apply some or all of what you were paying on it to the new car loan. In the end you'll pay the new car off faster also and incur less interest, and if you can get a lower interest rate for the new car your payment will also be lower. Just don't miss a payment or you may get nailed with penalties
3. First off, its interest only not taxes that you're paying. Second, you dont have to refinance to save yourself on interest. If you refinance and keep the same term, it would lower your monthly payments, not lower your interest. All you have to do is make a one time, $6K payment. Then every month after that, more of your monthly payment is going towards principle and less towards interest. If the 22K loan is the newer loan, then you're putting more of each payment towards interest than you are on the 10K loan. It would be better to pay down that one. However if you could put it towards the 10K car and then double up on payments, you could pay it off faster and hten roll all the extra monthly money to the 22K car and pay that off faster too. Your call!!