Pay off car loan from offset now or keep savings for mortgage interest?

J

JanesOmni

New Member
Hey everyone, just keeping this anonymous fo r now as we haven't announced yet.

My wife is 16 weeks pregnant with our first child.
She'll be going on maternity leave next year, so we'll be back to just my income. We have a mortgage, but we've reviewed our budget and feel we'll be okay.

My question is: we owe $25,000 on her car, paying $150 per week. We have $90,000 in our offset account. Would it be better to pay off the car loan now using money from the offset? That would free up extra cash flow while we're on one income. However, it would also mean less money in the offset, which reduces the interest we save on our home loan.

Or should we leave things as they are? We can definitely manage, but having a bit more cash flow would be helpful so my wife might take longer off work. We just don’t want it to affect our mortgage interest—does that make sense?
 
The car loan has a higher interest rate, so you should sell the car. The $25,000 you take from your offset account won't have much impact overall. It's better to reduce your stress, especially with a baby on the way.
 
Your car loan interest rate is probably higher if so, pay that off FIRST. The extra $25k in the offset saves you interest on your home loan, but that saving becomes irrelevant if you're paying even more interest on the car loan. Depending on the terms, you could be paying 12% on $25k just to save 5.5% on $25k in your offset it doesn't make sense.
 
Keeping money in an offset account? To save on interest? But you have a car loan probably at a higher rate. It just doesn’t make sense. The only real reason is to keep a cash buffer for emergencies. Though I’d think the remaining 65k is already more than enough for that.
 
Pay off your highest interest rate debt first! Or, if you have many small loans, consider paying off a bunch of little ones to feel that sense of progress.
 
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