Payoff a car loan?

[debian0001]

I have a car loan.. so the last 2 years this is how much interest I have paid.

• Interest Paid Year to Date:$176.92
• Interest Paid Last Year:$358.74

Plus 2014 which would probably be around 300.

I am aggressively paying it off but on the fence of just paying it off with cash. Would you? I won't be in any bad financial situation if I do. It's more that I like having the $$$ around.

Thoughts?

 

[Engineer]

What interest rate are you paying? How much longer do you have on the loan?

 

[debian0001]

8,500 is left out of the 17,500 loan. 2.74 %. EOL of the loan is 03/25/2020.

 

[Engineer]

8,500 is left out of the 17,500 loan. 2.74 %. EOL of the loan is 03/25/2020.

IMO, it depends on if you can live without the money cushion and what rate of investment are you getting right now on that money? If you have it in a bank account or even most CD's, it's earning far less than 2.74% most likely. Even with compounding, you're not getting near 2.74%, again, most likely. I have a few CD's at 2% and 3% that I might not pay it off with but with my savings account or the smaller CD's, I wouldn't hesitate to eliminate a 2.74% loan if I had the resources for the most part.

 

[hans007]

2.74% is not a terrible rate.

if you had the money to pay it off, thats not a terrible rate of return given stocks and investments havent really done much in the past few years (and its entirely likely theres more downside than not). so paying it off is like getting a 2.7% return on investment.


if i had a 1% loan or something, i'd probably park the money in some sort of 3-4% dividend or bond fund instead, but yeah depends on your risk profile. honestly i love not having to make payments on things each month even if its financially slightly better to do something else. certain bit of feeling of freedom there.

 

[dave_the_nerd]

2.74% is not a terrible rate.

if you had the money to pay it off, thats not a terrible rate of return given stocks and investments havent really done much in the past few years (and its entirely likely theres more downside than not). so paying it off is like getting a 2.7% return on investment.


if i had a 1% loan or something, i'd probably park the money in some sort of 3-4% dividend or bond fund instead, but yeah depends on your risk profile. honestly i love not having to make payments on things each month even if its financially slightly better to do something else. certain bit of feeling of freedom there.

Yup. Since it's a relatively small amount of money one way or the other, your feeling of freedom matters, and is probably worth a few bucks.

But if paying it off will wipe your savings account out so you have no reserves if you get laid off? Nope. Keep the money liquid and call it insurance.

2.7% is low.

 

[Engineer]

2.74% is not a terrible rate.

if you had the money to pay it off, thats not a terrible rate of return given stocks and investments havent really done much in the past few years (and its entirely likely theres more downside than not). so paying it off is like getting a 2.7% return on investment.


if i had a 1% loan or something, i'd probably park the money in some sort of 3-4% dividend or bond fund instead, but yeah depends on your risk profile. honestly i love not having to make payments on things each month even if its financially slightly better to do something else. certain bit of feeling of freedom there.

I think we're in agreement here. I would pay off the 2.74% rate because it's difficult to get a guaranteed 2.74% rate of return unless you're locked into some older CD's generally. I have two car loans at 1.29% and 0.74% and I won't pay them off because even low 1% rates compounded can beat those pretty easily.

Like I said, if you're OK with your cushion left after paying it off (see what Dave said above) and don't have anything that will compound more than the 2.74% rate, I say go for it.

As for freedom, I get the same whether I pay it off or have the money available to pay it off. The only exception I would say is my house, which has been paid for over 10 years ago. That's a decision that I NEVER regret and still feels good to this day to get that out of the way.

 

[RLGL]

Call the loan co. What is the difference between the payoff amount and the total of the remaining payments?

 

[Puffnstuff]

I think that the fellas have covered this enough already but if the money you would use to pay off the loan is earning more interest than what the loan is costing you let it ride. If it isn't then pay the loan off and reinvest that payment money to allow it to begin earning interest again. Then resist the urge to buy anything else and enjoy what you have.

 

[debian0001]

I ended up paying it off. Now I am debt free again . I am not hurting for cash either.

 

[Engineer]

I ended up paying it off. Now I am debt free again . I am not hurting for cash either.

Congrats!!! Feels good, doesn't it!?!?

 

[debian0001]

It definitely does. I think next time though I am going to limit my budget, maybe even just pay cash. I don't have to hopefully worry about it for a bit though. For this car I got a loan of 17500 and got the car used with low mileage.