I have a new car loan for $12k at 7.74%, and about $10k in old credit card debt that I just transferred to a card with a ~20% APR after the initial 13 month zero-interest promo. (So, I am not being charged interest on the credit debt until 2021.) I make minimum payments of $250 on the car loan, and 2x minimum ($65) on the credit card every month.
I also have an extra $400 in my monthly budget to put towards debt. Normally I "avalanche" debt and pay the higher rate accounts first but I'm confused as to which account to pay now because of the zero-interest promo.
- Pay an additional $400 toward the credit debt during the 0% promo and try to reduce it by $5580 in 12 months? This way I'm only charged 20% interest on the remaining $4400?
- Pay all $400 to the car loan since it is currently charging interest, and try to reduce my principal by a third ($4800) in the first year?