Question about which loans I should attack first

[FinanceNoob]

I have loans outstanding and would appreciate advice on which I should pay down first (or consolidate)...

1. Home Mortgage - $85K @ 5% Fixed Rate (~12yrs left on the mortgage)
2. Equity Loan A - $19K @ 6.9% Fixed Rate (min. payment ~ $150/mo)
3. Equity Loan B - $46K @ 3.76% Variable (min. payment ~ $150/mo currently)

Note: Loan B is a *Variable* Rate + I have an additional line of credit available of $35K through this loan.

I was thinking I should throw extra money each month to pay down the higher rate loan first (A) because it'll be easier to reduce and is a higher rate right now. However, Equity Loan B has more outstanding and is a variable loan so there is some risk there that interest rates might rise, quickly and I'll end up paying more in interest there 'someday'.

Any recommendations are much appreciated.

Thanks!

[kork13]

Two sides to my adivce....

**The safe advice:
I agree with your idea to take down equity loan "A" first. At least for the present, it's nearly double the interest rate. When interest rates eventually start heading back up (might be a while.... :S), you can reconsider where you send your payments. Until then, knock out the higher rate loan as much as possible.

**Riskier advice, but potentially more "money-smart":
Take $19k from the LOC and pay off Loan "A". This consolidates your loans, and also puts your debt at a lower interest rate. Now, while rates are still low, refinance your variable Loan "B" into a low, fixed rate loan. Just make sure that you don't extend the term of the loan, or it's all for naught. That will lock in a low rate, then you can focus on paying down your debts faster, and at a low, solid rate.

With this second option, just be very careful... Do your research before actually using the LOC to pay off "A", making sure you'll be able to refinance the LOC (with a $65k balance) into a fixed loan with a good rate and without extending the term. If you have the options open to you that you can make the riskier route work for you, do it. Otherwise, just follow your gut, and take the safe route that you already were planning. The safe route will cost you a bit more in the end, but there's less chance that it will come back to bite you.

[PetMom]

The equity loan B leaves you vulnerable to any high interest rates that could come up and this is such a large amount.

Don't know this but could you refi the equity loan B for a fixed rate?

Variable rate loans are not good, and I know when interest rates are low as they are now and have been it is not a big deal, but when they do go up you have a high interest rate wrapped into your payment. That is why lenders like these - there is a false sense of security at how low the payment is - but there is potential this going up quickly.

[buildmybudget]

How much extra income do you have to put towards debt each month?

[maat55]

I would go 2,3,1.

[olga1311]

I would attack Loan C first without a doubt. Majorly because its a variable loan and the interest might rise. the fixed loans will stay the way they are untill you pay them off but the variable wont. If all the loans were fixed I would advice to attack the smallest loan first - loan B. And this strictly because psycholgically getting rid of a loan in its entirety will give you such pleasure and will fire you up so much that you will be even more agressive in repaying the other loans, thus repayign them more quickly.