Hypothesis on the special payment

Dear congregation,

here is a purely hypothetical example.

Annuity loan, 100k outstanding balance
Car (or furniture or other) financing, outstanding balance 5,000 €, installment approx. 500 € per month.

If you are allowed to make a 5% prepayment on the annuity loan and only have 5,000 € left, it is always advised to allocate this to other liabilities in order to be debt-free.

I am wondering quite generally:
Is this universally valid, or would in the above case a prepayment be more sensible?
The other loan would be repaid within a year anyway and this would increase the repayment portion in the mortgage financing.
What do you think?

I would always pay off the loan with the higher interest rate first, and that will always be the consumer loan. Unless, of course, there is a high prepayment penalty. Example: last year we had 5k euros. The car loan was still 3600 euros. No prepayment penalty, but 8% interest. Mortgage loan only 2.5% interest. Car loan completely paid off. A settled loan also looks good on the [Schufa]. Well, we also made a special repayment (maximum 4900 euros annually). Since we had no equity, we are now saving it backwards.

The initial question cannot be answered that easily. It is not clear what your goal is.

I am not pursuing any particular goal. As mentioned, this is a hypothesis. What matters to me is whether it would make sense here, contrary to the otherwise valid opinion/recommendation, to rather make a special repayment on the annuity loan, since with the 5% special repayment I have an interest and compound interest effect over the remaining term, if the consumer loan is paid off within a year anyway.

In general, the loan agreement must be adhered to. That means you cannot necessarily repay a loan early. If the bank agrees to early repayment, there is a prepayment penalty, which usually makes it unattractive. I would say that therefore, the special repayment (at least financially) will be more reasonable.

My concern is whether it wouldn’t make sense here, contrary to the usually valid opinion/recommendation, to rather make a special repayment on the annuity loan, since with 5% special repayments I would benefit from an interest and compound interest effect over the remaining term, if the consumer loan is paid off within a year anyway.

Correctly, when redeeming the consumer loan, you would have to apply the saved installments from the consumer loan again as a special repayment on the construction loan the following year. Only then is a correct comparison possible. If you then use the possibility of special repayment again through normal savings, the possibility is already unattractive from the start.