| Pay off low interest Car Loan? |
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Jack10525
New Member
Cash: $ 0.90
Posts: 4
Joined: 05 May 2018
Location: South Florida
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| Pay off low interest Car Loan? |
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I've got about 6500 left on an auto loan and 1500 on a credit card. I have 15k in an emergency fund (cash) and am wondering if I should just pay off this debt now. The car loan is 2% and the CC is no interest until Aug 2018. I just hate having payments. Financially I live well below my means but am looking at buying a new car at the end of this year. What would you do?
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Thu May 24, 2018 10:42 pm |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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Here's what I do.
I have an Index Fund that has an average long term return of 11%/yr. When I buy a new car, I leave my own $35k in that fund and I finance 100% of the new car for 5 years. At 2%, the 60 payments cost $36,800, ie about $1800 for the interest.
Meanwhile, the $35,000 that I left in the 11% fund nearly doubles in 5 years (it usually takes about 6 1/2 yrs by the Rule of 72).
So no, I never prepay a car loan - I haven't paid cash for a car in 35 years.
But the key is - I use that borrowed money to earn more money (11%). But if you leave it in cash, you won't earn a return, you'll lose 2%.
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Thu May 24, 2018 11:18 pm |
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Jack10525
New Member
Cash: $ 0.90
Posts: 4
Joined: 05 May 2018
Location: South Florida
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Can you explain that in a little more detail? Say I don't have 35k cash to stick in an index fund. How would I go about setting this up?
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Sat May 26, 2018 12:12 am |
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tomteathers
First Time Poster
Cash: $ 0.20
Posts: 1
Joined: 26 May 2018
Location: Au
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Man. Making loans is really hard sometimes. i remember when i had commercial equipment financing loan. it was really helpful but i had to be responsible for it. i'll look for my calculations and get back here.[/url]
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Sat May 26, 2018 6:43 am |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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quote:
Can you explain that in a little more detail?
The concept is to avoid using your available money to prepay loans - and instead use it to earn new money.
In your case you would invest the $6500 at 11% rather than spend it to prepay a 2% loan.
It sounds like a small savings - but if you follow that rule for 30 years or more, and allow it to compound, it grows into millions. Much of my wealth came from following that rule.
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Sat May 26, 2018 4:08 pm |
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daisyfaith
New Member
Cash: $ 1.10
Posts: 4
Joined: 01 Mar 2018
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Free loan calculator or non-public mortgage astrologer out of Certax London.
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Mon Jul 23, 2018 7:42 am |
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Garson
Senior Member
Cash: $ 44.75
Posts: 251
Joined: 21 May 2018
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Being in such a situation is an awful thing. I myself sometimes have similar troubles with money. Last month needed money to repair my PC and thanks to paydayloansonline.reviews, I was able to find a good lender and the issue was solved.
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Fri Aug 24, 2018 1:06 pm |
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franklee
Full Member
Cash: $ 16.10
Posts: 91
Joined: 12 Jan 2018
Location: NY
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It is always hard to waste money in vain. Money should work. I used to take a loan at Phillipiens last year, around 3k and was pleased to know that I cound get my money in 10 minutes after approval of my application form through the internet. These guys https://binixo.ph/ are real magician I should say
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Tue Sep 11, 2018 1:55 pm |
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adityaroy
Contributing Member
Cash: $ 7.85
Posts: 32
Joined: 04 Jan 2018
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As you said that you have an auto loan of $6500 and credit card payments of $1500, I suggest you invest the emergency fund in a new investment scheme. Even if you can repay both loans, it would be better if you invest somewhere else and reap the benefits. You can invest in gold certificates as they are deemed as one of the best investment options. They are available in the denomination of 100 gm, 500 gm, and 1 kg and more flexible in terms of selling, as compared to physical gold.
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Wed Feb 27, 2019 2:53 pm |
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