Pay off the car and save $4000 interest over 3 years?

[RADRACR]

I've saved enough to the point of being "comfortable" if I paid the car off today. But my irrational mind hates to see such a large sum of money disappear in one fell swoop. I want to buy a home within the next 2-4 years, so is that something I should consider? Take the bullet on the $4000 but have enough liquid assets for a down-payment on the home? What would you do?

[kevinbahnz]

Pay it off. The money is not disappearing if you're saving on the interest. You're money is disappearing if you keep paying interest.

[justinnum1]

pay it off

[Wakka]

if youre coming on here to ask... you want to keep the money. So keep it and keep paying interest. Its not up to us its up to you.

[BayMoWe335]

What's the interest rate?

[SS e93]

If it makes you more comfortable, do a few large lump payments. YEs you still pay some interest over that ~6-12 month period but you have that liquid just in case.

[Seminole]

All about the time value of money. A dollar today is worth more than a dollar 3 years from now.

What is your interest rate and how much do you owe? If you are only paying 0.9% or 1.9% in interest you'd be better served to keep the money and try to invest it in some way. You could easily earn more than what you are paying. But if you have a high interest rate then it makes sense to pay it off.

[bugmcw]

Originally Posted by Seminole

All about the time value of money.

What is your interest rate? If you are only paying 0.9% or 1.9% in interest you'd be better served to keep the money and try to invest it in some way. You could easily earn more than what you are paying.

I am with this guy, if you ever took economics it is all about opportunity costs... what is your interest rate on your loan? Could you make more than that interest rate investing your money elsewhere? We need more info to make this decision...

Without having any more information? I say pay it off.... but that all depends on your interest rate.

[kevinbahnz]

his interest rate has got to be more than 0.9 or 1.9 if it amounts to $4000 in 3 years.

[Seminole]

Originally Posted by kevinbahnz

his interest rate has got to be more than 0.9 or 1.9 if it amounts to $4000 in 3 years.

Also depends on the principal balance. If he's saying he might use the money as a down payment on a house, it's gotta be a sizable chunk of change.

[bugmcw]

Originally Posted by kevinbahnz

his interest rate has got to be more than 0.9 or 1.9 if it amounts to $4000 in 3 years.

$4,000 is his remaining principal amount, right? If he waited he would be paying 4,000 plus interest.

[kevinbahnz]

in his title is sounds like he's saying he would save $4000 in interest over 3 years?? the only reason why i am not paying off my car is because i am only paying $7xx.xx in interest for 5 years on a brand new car.

[silvergray545]

Edit: Misread the original post. If somebody told you, you could save $4k today, would you not jump on it?

[Seminole]

Originally Posted by kevinbahnz

in his title is sounds like he's saying he would save $4000 in interest over 3 years?? the only reason why i am not paying off my car is because i am only paying $7xx.xx in interest for 5 years on a brand new car.

I'm trying to back into what the principal might be. Even if the remaining balance was $30,000 at 7% interest it's only giving me $3,300 in interest. So either his interest rate is outta control or he has a large principal balance remaining.

Originally Posted by silvergray545

Edit: Misread the original post. If somebody told you, you could save $4k today, would you not jump on it?

It depends on the factors. If you could reasonably earn more money by investing it elsewhere it makes no sense to blow a bunch of money now and forfeit those possible returns. Especially by dumping that money into a depreciating asset like a car. In the past 6 months I have bought and subsequently sold Ford and Apple stock. I earned around 24% on the Ford stock and another 15% or so on the Apple. That's in just 6 months. I'd much rather have kept my money and earned that kind of return as opposed to trying to just save some interest. There are obviously risks involved as the market could go down, but that's a decision you gotta make.

[RADRACR]

Originally Posted by Seminole

I'm trying to back into what the principal might be. Even if the remaining balance was $30,000 at 7% interest it's only giving me $3,300 in interest. So either his interest rate is outta control or he has a large principal balance remaining.

Thanks guys. I'm not comfortable getting into specifics on the net and I'm rounding up the interest a little, but both numbers are less than $30K @ 7% and I'm using an interest calculator

Unfortunately I have no idea how to invest nor have the energy for such endeavors.

[Mr Tonka]

Originally Posted by Seminole

All about the time value of money. A dollar today is worth more than a dollar 3 years from now.

What is your interest rate and how much do you owe? If you are only paying 0.9% or 1.9% in interest you'd be better served to keep the money and try to invest it in some way. You could easily earn more than what you are paying. But if you have a high interest rate then it makes sense to pay it off.

This. ^^

Even if he's at 1.9% he could find a safe investment that will not only pay for his interest, but net him a little coin in is pocket.

[Seminole]

Originally Posted by aestheticstorm

Thanks guys. I'm not comfortable getting into specifics on the net and I'm rounding up the interest a little, but both numbers are less than $30K @ 7% and I'm using an interest calculator

Unfortunately I have no idea how to invest nor have the energy for such endeavors.

All good if you don't want to share . Some advice though, make sure you use an amortization calculator when you calculate everything (one like this: http://www.bankrate.com/calculators/...alculator.aspx . It says mortgage but you can still use it).

An interest calculator (like this http://www.interestcalculator.org/) is calculating the return on your principal balance, not how much you are paying. The closer you get to paying off the car the less you will be paying in interest each month. That's probably why I'm off compared to your calculation.

If you aren't comfortable investing the money either on your own or through a broker then I guess pay the car off. It doesn't do you any good just sitting in your bank, and at the very least it will save you some money in interest.

[bugmcw]

Originally Posted by aestheticstorm

Unfortunately I have no idea how to invest nor have the energy for such endeavors.

If this is the case, by all means pay it off. You are throwing money away if you don't...

I am not sure why you came asking for advice if you are unwilling to give basic details about interest rate and remaining principal amount though, divulging those items certainly pose no legitimate risk to you.

[RADRACR]

Just a feeler because I'm interested in others' perspectives. The gist of it is the liquid assets for the future. I'm well aware that logically it makes sense to pay it off, but I like having a safety net. I lived paycheck to paycheck for most of my twenties trying to find a good job, with lots of student loan debt and other debt. I ignored my mom's advice to pay off the debt ASAP, because I was worried about the dead period between my contract jobs. In the end, I maintained excellent credit because I always had liquid money to pay bills. So I guess my personal experience makes me want to cling to money in the bank.

As icyhot notes, maybe a few lump sums works best for me. Thanks all for your perspectives, especially Seminole!

[MisterSkiMask]

Pick a number to throw at the payment in addition to your minimum payment. You will expedite your payoff without losing your nest egg.

[silvergray545]

Originally Posted by Seminole

It depends on the factors. If you could reasonably earn more money by investing it elsewhere it makes no sense to blow a bunch of money now and forfeit those possible returns. Especially by dumping that money into a depreciating asset like a car. In the past 6 months I have bought and subsequently sold Ford and Apple stock. I earned around 24% on the Ford stock and another 15% or so on the Apple. That's in just 6 months. I'd much rather have kept my money and earned that kind of return as opposed to trying to just save some interest. There are obviously risks involved as the market could go down, but that's a decision you gotta make.

Don't get me wrong, I agree with you 100%. But the OP said he has enough money in the bank to pay off the car and some. So that means he has well over $30k in cash. Personally, I would have invested that along time ago. But the OP said he doesn't have the know how or the energy to do so. Writing a check and paying his car off is the easiest way for him to save money.

No offense to the OP, I was just stating the obvious.

[silvergray545]

Originally Posted by aestheticstorm

Thanks all for your perspectives, especially Seminole!

Seminole knows his stuff! He's always great help!