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Started By
Message
Interested in thoughts. What would you pay off?
Posted on 12/29/23 at 9:03 am
Posted on 12/29/23 at 9:03 am
Assuming you have money on hand sitting in a high interest savings to pay one or all, which would you do, of any?
A) $9k car loan (4% rate)
B) $17k home remodel loan (7% rate)
On one hand, I am leaning to knocking both out at once. Peace of mind would be nice. Also I feel I am losing money mathematically based on rates.
Am I thinking dumb to throw a chunk at it to pay it all off now versus small payments for next couple of years?
A) $9k car loan (4% rate)
B) $17k home remodel loan (7% rate)
On one hand, I am leaning to knocking both out at once. Peace of mind would be nice. Also I feel I am losing money mathematically based on rates.
Am I thinking dumb to throw a chunk at it to pay it all off now versus small payments for next couple of years?
9
Posted on 12/29/23 at 9:09 am to HailToTheChiz
Pay both off
Posted on 12/29/23 at 9:12 am to HailToTheChiz
quote:
B) $17k home remodel loan (7% rate)
This one first. Definitely.
Posted on 12/29/23 at 9:13 am to HailToTheChiz
I’m in a similar situation. My mortgage is 2.9%. I’m making 5% with Morgan Stanley AAA account. That’s a no brainer.
However, in your case the 7% on remodel loan should be deductible so it would be close to evening out depending on tax bracket.
Sometimes having cash on hand is comforting with an erratic economy.
However, in your case the 7% on remodel loan should be deductible so it would be close to evening out depending on tax bracket.
Sometimes having cash on hand is comforting with an erratic economy.
Posted on 12/29/23 at 9:20 am to HailToTheChiz
Home remodel if you have plenty cash available.
Posted on 12/29/23 at 9:23 am to HailToTheChiz
I'd pay off B) you are losing money at 7% versus HYSA
I'd hold off on A) not necessarily because you are making more on HYSA than losing at 4% loan rate (after paying tax on the interest you're closer to break even). Rather, it doesnt tie up the $ so you have it available for an opportunity or emergency. Once you pay the loan you no longer have access to capital at that relatively low rate.
At 4% I'd let the car loan go to full term and probably just invest the $ in an S&P 500 ETF instead hoping for ~10% return over long run.
I'd hold off on A) not necessarily because you are making more on HYSA than losing at 4% loan rate (after paying tax on the interest you're closer to break even). Rather, it doesnt tie up the $ so you have it available for an opportunity or emergency. Once you pay the loan you no longer have access to capital at that relatively low rate.
At 4% I'd let the car loan go to full term and probably just invest the $ in an S&P 500 ETF instead hoping for ~10% return over long run.
Posted on 12/29/23 at 9:43 am to HailToTheChiz
quote:
B) $17k home remodel loan (7% rate)
Absolutely pay that off.
quote:
A) $9k car loan (4% rate)
If peace of mind (from having no debt) is important enough to you, pay off this one at the same time. If it's only moderately important, then debt-snowball your remodel loan payments over to the car loan. If peace of mind isn't all that important, just keep paying the car loan as normal while putting the money you had been paying towards the home loan into something earning 4% or more.
If that's all the debt I have, I would go with paying off the home loan then debt snowball the car loan.
Posted on 12/29/23 at 9:50 am to Bard
Thanks everyone 
This post was edited on 12/29/23 at 9:51 am
Posted on 12/29/23 at 11:37 am to HailToTheChiz
Just something different to throw out there.
Pay off the home remodel.
Take the payment to the remodel and throw it on top of the car.
I understand the math works with different methods.
But I equate life a different way.
If I'm paying $20k per year in interest, that is 3 more months that I have to work before retirement for every year I am in such debt.
Imagine knocking down that interest number to below $4k/yr. Imagine having several years at $0k/yr.
Pay off the home remodel.
Take the payment to the remodel and throw it on top of the car.
I understand the math works with different methods.
But I equate life a different way.
If I'm paying $20k per year in interest, that is 3 more months that I have to work before retirement for every year I am in such debt.
Imagine knocking down that interest number to below $4k/yr. Imagine having several years at $0k/yr.
Posted on 12/29/23 at 1:31 pm to meansonny
Good point as well
Posted on 12/29/23 at 1:34 pm to HailToTheChiz
quote:
Am I thinking dumb to throw a chunk at it to pay it all off now versus small payments for next couple of years?
No. Get yourself out of debt and don't think about it again
Posted on 12/29/23 at 3:59 pm to Ostrich
The borrower is slave to the lender.
Posted on 12/29/23 at 4:55 pm to HailToTheChiz
Paid off car note this year - tired of having it and cash was available. We have no recurring debt and any projects are cash only. It is a preference plus we are a semi-retired household... I am debt adverse [father and his father were both gamblers and likely has skewed my view of anything money]
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