• We’re currently investigating an issue related to the forum theme and styling that is impacting page layout and visual formatting. The problem has been identified, and we are actively working on a resolution. There is no impact to user data or functionality, this is strictly a front-end display issue. We’ll post an update once the fix has been deployed. Thanks for your patience while we get this sorted.

Payoff a car loan?

D

debian0001

Senior member
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?
 
debian0001 said:
8,500 is left out of the 17,500 loan. 2.74 %. EOL of the loan is 03/25/2020.
Click to expand...

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.
 
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.
 
hans007 said:
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.
Click to expand...
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.
 
hans007 said:
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.
Click to expand...


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.
 
Call the loan co. What is the difference between the payoff amount and the total of the remaining payments?
 
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.
 
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.
 
You must log in or register to reply here.

TRENDING THREADS

Back
Top