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Subject:  Re: IS a Car Loan any Better Than a CC Debt? Date:  6/19/2001  2:48 PM
Author:  TMFJeanie Number:  7907 of 15438

Typically, I'd go with paying off the highest interest loan first. But consider this: the car loan is fixed at 6.25% for a finite amount of time. The credit card, while only 4.9% now, has no guarantee of staying there, does it? Even if it was a balance transfer, those low rates are usually for a limited amount of time. It could suddenly jump to 12% or more before you've paid it off.

As for which kind of debt "looks better", my gut feel is that the best kind of debt to have is:

1. Home Mortgage - because it's an investment in equity.
2. Student Loans - also a type of investment in your earnings potential
3. Auto Loan - a neccesity. Nearly everyone needs a car.

I tend to place CC debt at the bottom of the heap because it's more an indicator of indulging "wants" instead of "needs" if you are in the habit of carrying a balance. And like others have already said, the scoring agencies know the car will eventually be paid off, whereas the CC balance could easily grow bigger.

Now... are you confused yet?

Cheers, Jeanie :-)
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