I have $25,000 saved. I have $17,000 in credit card debt with a fixed 3.99% APR and a $25,000 balance on a home equity line of credit with a variable APR. Do I pay off the credit card first and apply the rest to an emergency fund, or do I pay off the home equity balance first?
Untitled
As a general rule you should pay off the higher rate debt. That will provide you with the best return. That means you need to know what the rate is on the home equity line and where you believe it will be going in the next year or two.
What is not known is your income source or anything else about your assets and liabilities. You want to pay debt, but you also want some cash in hand, some liquidity. To get a more definitive answer, you need to speak with an investment representative who is aware of your complete financial position and your goals.
BankingQuestions.com is a free service made possible by the generous support of our advertisers. Advertisers are not responsible for site content. Please help us keep BankingQuestions.com FREE by supporting our advertisers. When you see an ad for a product or service you may have an interest in, click through to learn more.
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
As a general rule you should pay off the higher rate debt. That will provide you with the best return. That means you need to know what the rate is on the home equity line and where you believe it will be going in the next year or two.