The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Heckler on July 30, 2015, 11:55:50 AM
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Other than mortgage (paid off in Jan 2016), our only debt is a 0% Home Depot loan I could easily pay off, but I plan to minimize payments and stretch it out over the 1 year timeframe of 0% interest.
What say the Mustaches? Emergency, or good source of cash in the bank instead?
FWIW, were talking about a $400 loan I can either pay off today, or $100/month for the same cost. However, there may be a water heater and dishwasher in thenear future if they are also offered at 0%.
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Logically, I'd spread it out... but I wouldn't sweat it. This is small potatoes. I've paid off similar purchases before just because I get tired of writing a check each month and putting a stamp on it.
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I havent written a cheque since the internet was created. Nor am I sweating it, Im just curious how you all see this kind of debt.
I see Home Depot USA offers a 10% discount, or 0% financing in thier card, but my Canadian one does not. Makes me wonder if I paid 10% too much to start with (although thier price was competitive).
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Not an emergency, but I'd pay it off anyway. I just personally don't like things hanging around like that. But if you're sure you're going to pay if before it accrues interest, go for it. It seems like a paltry amount and have you put the $400 into savings that earns interest/investments? Otherwise you're not gaining anything from having the loan, so why not pay it off?
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A 0% loan is money in your pocket - I would stretch it out as long as I can.
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Its not an emergency but I would pay it off. To me the the ~$4 you make in a year on the interest isn't worth the hassle to remember to pay it and doing it. I would just pay it off and be done with it.
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The gain for the alternate use of money on the scale of that debt ($400) is not worth enough to make me want to worry about paying it in little spurts. Plus, I have had these lowes type 0% credit lines before, sometimes the terms say if you miss a payment (on accident) you can get hit with a massive interest % and back interest. It was worth it then when buying thousands of dollars of renovation supplies at a time (plus sometimes you get a discount for using their card), but not worth it in my book for a few bucks of interest gained on less than a grand. Even if there is no penalty clause i just wouldn't want to deal with it for such a small ammt of money.
For some kind of a sizable ammt of money, i would be willing to consider strategic 0% debt if the 'juice was worth the squeeze', i.e. i gained enough in order to make the hassle worth it.
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For that amount, I would pay it off and move on. Too small to really gain anything vs the risk of penalty interest.
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I have a similar situation. I am sitting on a $950 0%/no fee paid advance (originally $4000 for dental surgery) from Capital one from maybe five years ago. One of the reasons I don't pay it off is I know they will be bugging me to take out a cash advance (again). It keeps the account (which I don't need anyway) active, and since it's my oldest credit card, keeping the card improves the average age of my accounts. If I ever screwed up and they raised the rate, I would just pay it off.
Overall, such situations are really "a toss".
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Emergency, or good source of cash in the bank instead?
How much interest is this money going to earn sitting in your bank account while this loan is stretched out? like $0.25/month? It isn't worth the complication. I would pay it off, just so that I wouldn't have to use any mental energy in the future thinking about it.
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It's $400 at 0% interest - comon man, was this really worth a post? In what world could this possibly be an emergency.
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if they are also offered at 0%.
I suspect the interest is hidden in a higher base price.
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For the record it started as a $2000 loan. Im more debating if it makes sense to save up the next $3000 for a new water heater and dishwasher or if 0% is guilt free debt.
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For the record it started as a $2000 loan. Im more debating if it makes sense to save up the next $3000 for a new water heater and dishwasher or if 0% is guilt free debt.
I agree with the other posters. What the $400 will gain for you is vastly underwhelming vs what harm it could do to you.
Don't these 0% loans usually have a caveat of some sort? For example, if you fail to repay the full amount within 12 months, you get charged interest on the full amount of the loan ($2000)? 25% of that would be $500.
Nobody's saying you won't pay the remaining amount on purpose, but brain farts are known to happen to even the best of us.
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For the record it started as a $2000 loan. Im more debating if it makes sense to save up the next $3000 for a new water heater and dishwasher or if 0% is guilt free debt.
I was with you until I saw the bolded bit. They are gradually suckering you into becoming a consumer sucker.
Note: I have a 0% loan - the only debt I have had for 16 years. However, all the money for it sits in the special account I set up to pay for this stuff and is earning 2% PA. It automatically gets paid from the account whenever a payment is due, so I need to do nothing. So I actually HAVE the money and HAD it before the loan was taken out. The only reason I have the loan is that it makes more sense.
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A 0% loan is money in your pocket - I would stretch it out as long as I can.
Yep. Free money: take it.
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Consensus is it's free money as long as you have it and make damn sure you pay it monthly. I agree, and like the idea of automating payments.
Deborah, by "save up", I meant allocate new funds to be able to pay the loan off any time, because the cash I have already has a job - our emergency fund. A water heater isn't an emergency till the water is on the floor in a huge lake, although it's starting to dribble a bit.
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Im more debating if it makes sense to save up the next $3000 for a new water heater and dishwasher or if 0% is guilt free debt.
That seems like a lot of money for a water heater and a dishwasher. I just replaced both my water heater and dishwasher for less than $1k. Don't let the free money entice you to spend more than you otherwise would.
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On the one hand, the free float offered by a 0% loan can help you keep more money invested for longer. When I signed up for the Citi Double Cash card earlier this year, they gave me a $10k credit limit and 0% interest for the first year. I'm making minimum payments and investing the difference, with a plan to pay off the full amount at the end of the 0% interest period. The key to making this strategy work is to not buy a single thing that you wouldn't have bought with cash. If you don't trust yourself to do that, a 0% interest line of credit is playing with fire.