Should I Pay Off My Student or Auto Loan First?

Loans
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ask-anisha

Hi Anisha, I just got a bonus check. Should I use it to pay off my student loan or car loan first? My student loan interest rate is at 6% and my auto loan rate is 4%.

-J

Hey there, J,

I’d go with paying off your student loan first, since it has a higher interest rate. This saves you money in the long run. Of course, you should be careful to make the minimum payment on your auto loan as well.

Also, if you are currently building your credit, I’d recommend applying for a no annual fee credit card before you pay off your student loan. It’s easier to qualify for credit cards (or any loan, really) when you have multiple lines of credit open. If you apply for a credit card (even if you don’t use it), you’ll offset the credit hit you get when you close your education loan.