question for DCUM financial gurus re: paying loan off early

[Anonymous]

I have two loans and can afford to pay an additional $100-$200 a month in paying them off. Which one should I pay on:

Loan A: 55k with an interest rate of 4.8% on a rental property, 6 years left on the loan

Loan B: 255k with an interest rate of 4.3% on my residence, 29 years left on the loan

(No credit card debt, no student loans, a decent cushion of savings.)

If I want to pay an additional $100 - $200 a month to pay one of the loans down early, which should I go with? My first instinct was Loan A, because the rate is higher, but does the fact that my other loan has 29 years left on it (29 years of accumulating interest) actually mean that I should put the extra cash towards Loan B?

[Anonymous]

i'd look at tax implications. Probably, I'd pay down loan B, the personal loan first. The interest on loan A can be subtracted as an expense against the rental income.

[Anonymous]

Studies on paying off debt show that people are more likely to stick with it if they pay off smaller loans first. So, I'd suggest paying extra on Loan A, and then when loan A is paid off, putting all the money you were paying on Loan A towards Loan B.

[Anonymous]

Anonymous wrote:i'd look at tax implications. Probably, I'd pay down loan B, the personal loan first. The interest on loan A can be subtracted as an expense against the rental income.

And the interest on the personal loan can be deducted as well.

OP, it's a no brainer. Loan A has both a lower balance and a higher interest rate. Put any additional payments against that, and when it's paid off, put the ENTIRE payment towards Loan B.

[TheManWithAUsername]

Anonymous wrote:And the interest on the personal loan can be deducted as well.

OP, it's a no brainer. Loan A has both a lower balance and a higher interest rate. Put any additional payments against that, and when it's paid off, put the ENTIRE payment towards Loan B.

Agreed.

[Anonymous]

Pay off Loan A so you have a property free and clear. If push came to shove you could always live there, plus you'll be getting the full rental income as income to you.

[Anonymous]

I don't know how much 'cushion' or savings you have, but if I had the cash I'd just pay off loan A completely. Unless you have an insane savings account, its not earning 5%, and even considering tax write offs, it would be saving money in the long haul to just pay it off IMO.

Then once its paid off, you can increase your payments on the 29-yr loan. Win-win.