I have loans outstanding and would appreciate advice on which I should pay down first (or consolidate).?
by Mortgage Rates on Wednesday, October 6th, 2010 | 2 Comments
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Mortgage is the long-term debt and has its interest is fixed rate so the mortgage is not the first debt you should be worried (but you need still need to pay for it)
I don’t think it’s smart to get the credit on loan #2 to pay for the mortgage because the interest of the loan #2 has *variable rate* which you don’t know how much it’ll be. In additional, the loan always has the hidden fees beyond the interest that you must pay.
In this economic situation, I’d recommend you to pay all debts you have monthly on time. The bank likes to have the reliable accountable. If you really have the financial problems, you’d go to discuss with the bank and ask about the good solution.
The variable rate loan is very risky since that is your largest balance after the mortgage loan and it has a variable rate. I’m guessing it could go to at least 9.76% APR or higher, depending on whether you are in a “teaser” rate right now and what the cap is on your maximum interest rate.
You have way too much outstanding in equity loans, in my opinion. Start paying down the variable rate loan right away.
Interest rates are bound to be higher in the future, so your payments are going to go more to principal now than any payments you make in the future when rates are higher. Get going now!