What would be the best to pay off House/Car debt

[Cius]

Use of access bond will increase your monthly premiums though

Why? I have never seen this. If you have a 100K car debt and 100K saved in your bond you can move the 100K out of your bond to pay the car off in one shot but the bond repayment should be static. If they are lowering your debit order on your bond each time you put extra cash in you can ask them to stop that. What they are trying via doing that is to keep you paying for 20 years maximizing interest payments to them. Always pay extra into debts with the intention of paying off sooner, not to lower the debit order amount.

Some factors:
In general it is better to pay off higher interest rate loans first, like credit cards
If interest rates are roughly similar most people advise clearing the smaller debts first to reduce volume of creditors, and then rolling the payments into the next smallest one in a cascading relationship

For me its also about managing emergencies. An access bond is nice in that extra money you put in is very accessible in an emergency. This is important for me as I have serious medical stuff happening with my daughter in the background and I sometimes need cash on hand. Some months my medical payments can be R20K and other months 2K so having access to the money is important. If I emptied my bond into a paying off a car and that left me with no cash it would be very dangerous. Hence if I wanted to pay off the car first what I would do would be to save into the bond first. Once I had enough to pay off the car and enough of a buffer to spare I would give notice on the car loan (beware of penalty fees if you do it too fast) and end it.

On the other hand that works for me due to me and the wife having very high levels of self control financially. Extra money in the bond tends to stay there and we stick to our budget. If you tend to constantly dig into savings and tap into money perhaps paying off the car first is better as its harder to get that money back as opposed to the access bond.

FYI my debt calendar is ticking and according to my plan I will be debt free in 18 months time. I will have paid off the bond in 8 and a half years.

 

[LOTR]

Why? I have never seen this. If you have a 100K car debt and 100K saved in your bond you can move the 100K out of your bond to pay the car off in one shot but the bond repayment should be static. If they are lowering your debit order on your bond each time you put extra cash in you can ask them to stop that. What they are trying via doing that is to keep you paying for 20 years maximizing interest payments to them. Always pay extra into debts with the intention of paying off sooner, not to lower the debit order amount.
/snip (rest).

Your bond repayments are calculated on outstanding bond amount over fixed period at prevailing interest rate. If you withdraw out of your bond (effectively increasing your outstanding balance), your same repayment will not be sufficient to meet the outstanding amount over the period. Hence to amount of your repayment increases.

However, if you pay more (or have paid more) into your bond than just the minimum repayment amount, then the repayments will not increase, as your outstanding balance is below the maximum outstanding value allowed against the existing repayment amount.

Agree - pay off the highest interest bearing debt first using funds from the bond, but make sure you use the funds that you were paying into the original debt to repay the bond. Forget savings accounts, they pay minimal interest. Use the bond as a savings, reducing your bond interest expenses by up to half (dependent on Interest Rate of course).

 

[Friedpet]

If you have an access bond use that facility to pay off your car. I assume the home loan interest rate is less than the car loan interest rate. So after doing this you still remain in the same level of debt but a lower overall interest rate.

Your bond repayments are calculated on outstanding bond amount over fixed period at prevailing interest rate. If you withdraw out of your bond (effectively increasing your outstanding balance), your same repayment will not be sufficient to meet the outstanding amount over the period. Hence to amount of your repayment increases.

Calculate carefully. 100k car loan over 5 years will have less interest paid than a 100k home loan paid over 20 years. Granted, your terms are probably already less than 5 and 20 years. Point is to calculate the interest paid on both and then to decide. Don't just assume.
Best would be to use your access bond to pay off your car, then to continue paying your car instalments into your home loan. Then you'll actually be saving on the interest.

Extremely valuable advice :

Agree - pay off the highest interest bearing debt first using funds from the bond, but make sure you use the funds that you were paying into the original debt to repay the bond. Forget savings accounts, they pay minimal interest. Use the bond as a savings, reducing your bond interest expenses by up to half (dependent on Interest Rate of course).

 

[Work in progress]

Cius, LOTR and Friedpet
I took your advice and have paid up the car.... Now I am paying what used to be car installments as axtra payments on the bond.
Thank you so much!