Which debt first?

supersunbird

supersunbird

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So which of the following 2 debt should I focus on paying off first and the reason?

Bantam bakkie: +- R85 000 at 17% fixed interest rate

Duplex: +- R487 000 at 13.9% variable interest rate (hopefully going down 0.5% on the 19th of Jan)
 
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Bakkie then Dublex.

The bakkie has the highest rate and will be the quickest to pay off. You can then take the money you were applying to that loan and add it on to the amount you're currently paying off on the Dublex.

. . . I think
 
Bakkie first then duplex. The interest on a car loan is higher than the one on the home loan.
 
Yup, bakkie. And you could always try take R85k out of your bond and pay off the bakkie debt now, or in 3 months otherwise i think they nail you with penalties for not giving them notice of settlement
 
bwana said:
Bakkie then Dublex.

The bakkie has the highest rate and will be the quickest to pay off. You can then take the money you were applying to that loan and add it on to the amount you're currently paying off on the Dublex.

. . . I think
Click to expand...

Whats a dublex?
 
Smurfatefrog said:
Yup, bakkie. And you could always try take R85k out of your bond and pay off the bakkie debt now, or in 3 months otherwise i think they nail you with penalties for not giving them notice of settlement
Click to expand...

I don't think I'll be able to get R85 000 on the bond, its a fresh new bond. So I'll pay some extra on the bakkie each month. Its got 52 months left.
 
Pay the extra money into the Duplex - The car is a probably a HP type loan where the final amount and period are fixed at signing and you gain nothing by paying it off early (only penalties and the same value). By paying more into the bond you are reducing the next months compound interest and therefore saving yourself money by paying early. Should you need another loan in a few years time, you can withdraw the advanced payments made on the bond, where you cannot do this with the car loan. Credit ratings increases when you are ahead on your bond payment. The car becomes worthless the minute you drive it out of the garage. The duplex retains and hopefully increases its value. By putting the money in the bond you are actually investing in your financial future, by paying off the car all you have done is pissed the money into something that will eventually have no value
 
actually baileysinplett, you need to read up on the NCA...

Car loans are not allowed to operate the way you seem to think they do, they operate ALOT more like homeloans now, and you can pay off the capital portion quickly thereby reducing the interest paid on the loan.
 
ToxicBunny said:
actually baileysinplett, you need to read up on the NCA...

Car loans are not allowed to operate the way you seem to think they do, they operate ALOT more like homeloans now, and you can pay off the capital portion quickly thereby reducing the interest paid on the loan.
Click to expand...

Thats correct. What might be confusing is that they add on all the interest up front, but if you pay it off the deferred interest charges are reversed. So the statement balance will never be the settlement figure
 
Smurfatefrog said:
Thats correct. What might be confusing is that they add on all the interest up front, but if you pay it off the deferred interest charges are reversed. So the statement balance will never be the settlement figure
Click to expand...

Well, on the bakkie I'm paying about 60% on the interest side each month and on the bond... well... :sick:
 
Huh, bud, don't confuse yourself ! You should know by now what type of contract you got into regarding your car purchase ! If is fixed for a certain amount of months make sure the penalty of paying it earlier won't cancel any interest savings you may get. Needles to say - thanks God I am not go your shoes. You must be paying a fortune on fees and interest rates ! Another option is - sale the car to a illegal 'chop shop' and then tell the police it has been stolen and get have the insurance pay the bank. You still keep the money you got from the chop shop :D . Pay that into your house bond and presto - you have no car but a lot less debt to pay off. This trick works like a charm in SA :D
 
Another thing to remember is that i dont think you can just pay variable extra into your car finance every month, you have to either re-structure the agreement & have a set debit order or settle it completely. So if i was you i would pay any extra each month into your bond and then when you have enough available in the bond settle the car finance
 
However you do it I would settle the car first. It's a depreciating asset and in order to not waste so much money on interest it would be best to get it out of the way. Phone your bank manager ans ask him for advice. I don't think anyone here is qualified to.
 
Smurfatefrog said:
Yup, bakkie. And you could always try take R85k out of your bond and pay off the bakkie debt now, or in 3 months otherwise i think they nail you with penalties for not giving them notice of settlement
Click to expand...

It would be less than R85k. The settlement amount is a lot less than the principal debt.
 
edit: never mind I ****ed up the calculations

Basically, paying off the car earlier means the car is more worth to you than it would be if you go full term with it
The interest savings you'll have on your home loan will still be there once you paid off your car loan

Settle smallest debt first, snow balling your payments to the biggest debt

If your home loan had a higher interest rate than your car I'd give different advice
 
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