Which debt do I pay off first?

I have a bond, car and a credit card loan. I am rearranging my finances and am starting to see some surplus money which I would like to use for decrease my total debt. Which debt do I start with and settle or should I spread my surplus across all of them?

Congratulations on starting on the road to wealth and ultimately a comfortable retirement. The way to approach the early repayment of your debt is to start with the most expensive first. So for example if you are paying 12% on one of your debts and 10% on another, you should pay all of your available excess cashflow into the 12% debt and only when that is fully paid off do you turn to the 10% debt. Turning to your three debts, The Bond, The Motor Car debt and the credit card loan. Normally the credit card debt would be the most expensive so pay that off as quickly as possible and make sure that you continue to pay your credit card in full each month. You would then ordinarily direct your savings to the motor car loan and finally pay the money you are now saving towards reducing your bond. Remember that every rand in interest that you save equals a tax free saving of that interest.
Gavin Came
BComm LLB CFP(r), Financial Consultant
Sasfin Financial Advisory Services



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