| DougsMDX |
Payoff or invest ..............
Bought my MDX on 5/31 of this year and have made 5 payments so far. I now have the cash to pay off my loan. Loan Rate is 5.74%.
Thoughts on whether I should pay the balance or invest the money into something that hopefully will make more than 5.74%.
I know this is more of a financial advisor question, but thought I would post this in the forum for input. |
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| wing2299 |
| Just a thought, your investment income is taxable but the interest you are paying now is not tax deductible. |
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| SDTS |
never been a fan of sinking big dollarsinto depreciating assets.
It might not be the best financial decision in the world, but I would buy a boat!!!! :D JK...I would invest...with what was left over fromthe boat. |
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| renov8r |
While on the surface getting rid of debt is ALWAYS better than investing unless the rate is higher on the CD
, it smart ot thjink this through.
Although I had CD rates in front of me for more than 5.74% last month or so, the terms were not for long (18 months) and now rates have fallen. I have no real data on where intrest rates will be in 24 months or longer, I think about 50% of analysts are saying HIGHER, while 50% are saying lower. When you have nut jobs running Iran & Venezuala who knows what'll hapen with energy prices... SO, in the "peace of mind" dept. I guess the only thing certain is your current debt.
As someone else said, the income on CDs would be taxable and unless the loan you have is really a home equity loan it is not deductible, so EVEN IF YOU had a caould get a rate just equal to the loan you'd have a wash there. BTW, I would guess that by "invest" you really mean "in some low/risk instrument like a CD -- anytime you start to talk about investments that have more "potential" you are also probably into a more long term planning kind of thing, where your overall retirement strategy and risk tolerance have to be factored in...
You said that you "now have the cash", I guess my big question is WHY? As in: did somebody die (a one time event..) OR did you get a better job ( and your income will be higher for some predictable time period)?
My preference if this is one time event is to reduce debt-- that monthlky payment going awya "forever" would make almost anybody's day-to-day outlook a lot 'easeir'; if this is ongoing then I would be slightly more comfortable going for a higher rate on a CD or similar, as the couple of bucks that you'd be ahead would be less important...
As an aside, my wife and I sometimes deliberately do take advantage of "zero percentag/ no paymeny" offers on charge accounts and/or "major purchases". In eleven years of marriage we have never "gotten burned" by forgetting about these things but we know that we are the EXCEPTION, as we know MANY people who have dug themselves huge debt at high intrest rates in the same manner. The keys for us have been: a) split your paycheck(s) into multiple accounts and set up the amount that is earmarked for automatice deposit/withdrawal for the 'zero percent' accounts to the very dollar! b) use a shared account for day-to-day "slighty variable" costs likec gasoline/heat/electric to have a MODEST surplus c) have accounts link to ATM cards have only a FIXED amount in AND always tell each other WHEN a withdrawal is made AND how MUCH was taken out d) sweep the 'remainder' into an account that is there for 'surprises' both good & bad. Of course all those accounts (about 6-10 separate accounts at four different banks/credit unions) are kind of PITA to keep track of, especially on top 401k and such, and occiasionally we need to physically get a cashiers check across town for one reason or another but we have been able to but thousands more into are retirement that we would otherwise spend... |
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| G. COLTON |
What I would do would depend upon your total financial picture. You need to have "sufficient" savings to cover you for a rainy day. Since I do not know your income or expenses I do not know what percentage of your income this should be. You should have savings both in a more liquid state such as CD's and in longer term investment issues.
What you should do also depends upon what is your total debt situation. If you have lots of current debt/payments then it would probably be smart to pay off the loan. Or maybe better pay off the loans that carry the highest interest rate.
There are lots of factors to look at. You just do not provide sufficient information to make a realistic suggestion.
G |
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| SilveradoMDX |
quote:
Originally posted by G. COLTON
What I would do would depend upon your total financial picture. You need to have "sufficient" savings to cover you for a rainy day. Since I do not know your income or expenses I do not know what percentage of your income this should be. You should have savings both in a more liquid state such as CD's and in longer term investment issues.
What you should do also depends upon what is your total debt situation. If you have lots of current debt/payments then it would probably be smart to pay off the loan. Or maybe better pay off the loans that carry the highest interest rate.
There are lots of factors to look at. You just do not provide sufficient information to make a realistic suggestion.
G
:5: That hit the spot.... |
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