The Best Loans to Pay Down First

Focus on wiping out credit-card and consumer debt first.

I’ve just started graduate school, and my grandmother plans to give me money to help with my expenses. Should I use the money to pay down my undergraduate student loans or put it toward my car loan? I’m paying 5.9% on the car loan and have about $11,000 left on my undergraduate loans, at 6.3%. --D.M., Philadelphia

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.