What to do with bonus – should I pay off my credit cards first, or sell car and cover the amount I’m upside down on? I have 2 cars so I would go down to 1. Bonus ~$10k / CC debt high interest over 20% ~$5.5k (total min monthly payments ~$350) / Upside down on car ~$9k but 10% interest rate (car payment $780)
No question, answer, or discussion of any kind facilitated on this site is confidential or constitutes financial or legal advice. Questions answered are selected based on general consumer interest, and not all are addressed. Questions and answers may be displayed online and archived by Wealthtender. To make Wealthtender free for readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a conflict of interest when we favor their promotion over others. Wealthtender is not a client of these financial services providers. Learn more.
Congrats on the bonus—that’s a great opportunity to make a dent in your financial picture.
In general, high-interest credit card debt (especially over 20%) is the most expensive kind of debt to carry, so many people prioritize paying that down first to stop the bleeding from interest. It also improves cash flow faster, since your minimum payments drop once the balance does.
That said, being $9k upside down on a car with a $780/month payment is also tough—especially if the second car isn’t essential. Going from two cars to one could free up a lot each month, even if you have to use part of your bonus to cover the negative equity.
A few people in this situation might:
-
Use the bonus to pay off the credit cards—cutting out 20%+ interest and saving $350/month in payments.
-
Then look at selling the second car—and see if you can roll the negative equity into a cheaper car loan (or even find a break-even deal depending on market value).
Of course, the best move depends on which monthly payment is stressing your budget more, how essential the second car is, and whether you can get by with just one.
Either way, using the bonus to eliminate some debt is a solid move—you just want to make sure it reduces your financial pressure long-term, not just shifts it around.