is it wise pay off car loan?
I have a car loan of 21k remaining and to be paid off in next 3.5 years. With recent events i have enough cash to pay it off. Is it wise to pay off the car loan? TC:180k YOE: 2 Edit: since lot of people are basing their advice on the interst rate, it's 3.24 at the moment. I've talked with the credit union and it's the lowest they can go. I do have other investments, but I'm planning to keep them long term (5+ years).
No. Invest that money and gain profits.
depends on how much interest you pay..i m paying just 250$ a year so i m not prepaying it..ill rather invest or pay high interest loan first
Depends on risk factor, if you loose your job and stock market goes down, can you still handle the loan?
Its definitely a balancing of priorities, Cash Flow vs Rate of Return. When I started out of college with a highly variable income, I chose to pay off in 1/2 the term. 20x20 hindsight the market skyrocketed during that time. Today on the other hand, there are plenty of clouds on the horizon. Just make sure you have 6mon of spending saved and you'll be fine either way.
More of risk management. My dad kept our car loan at 8% when we could have paid it anytime and meanwhile he made 2-4x money in real estate.
Unless you have 0% interest on your loan, pay it off now if you're able otherwise it'll cost you more in the long run. Debt 101: pay off all loans (except mortgage), save 50% of your salary in case you lose your job, and finally pay off the mortgage if you have one.
Would you still pay loan at 1% interest? You can keep money in savings account at 2%. Don't blindly follow any 101.
Point being, why would you not pay off the loan if it's going to cost you more than you paid for the car? That payment you no longer have could go straight into that 2% savings every month. And, best advice, after you pay off the car keep driving it until it's ready for the junkyard.
It’s a good idea: - if you pay off high-interest loan 6+% - There is no tax (if you made a 6% investment, that would be reduced by your marginal rate of tax, making it closer to a 4% return) - It improves your credit score potentially (you need some loans but it’s easy to get too many) - It’s a guaranteed return— you can’t possibly “lose” the 21k you paid to the bank. Its a bad idea: - You could get a much higher rate of return in the market It’s really a question of risk. There’s a potential large correction coming that could reduce your 21k investment in half. Or double it again. What’s your crystal ball saying?
Take into consideration if you need to quickly sell it, tradein or its totaled. Best not to be upside down in terms of book value but no need to payoff 100 percent now if that yields no ROI.
Not related, I recently read about how the wealthy don’t put money into depreciating assets but still have fancy cars. Here how it works: 1. Has a net worth of 300k. (Excluding primary residence) 2. Apply for Securities-based loan, aka SBL( min 150k). 3. Take out 40k to purchase a car and pay interest *only*. Use your remaining cash and invest.
If you want helpful advise, please update this post with interest rate
Depends on interest. If it’s lower than what you can get in investments, then no.