Author Topic: Pay for home project in installments to continue funding IRA. Good idea?  (Read 897 times)

mrteacher

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Not up for debate: I am hiring out a home project for close to $10,000.

Up for debate: I am wondering if I should entertain paying it off over the next few months (offer: up to 15 months at 0%) so I can still contribute to my IRA monthly, or if I should pay for the project all at once, in a lump sum, and delay IRA contributions for a few months. I finished funding my 2018 IRA near the deadline and, were it not for this project, would begin funding my 2019 IRA this month.

What is there to consider? At this point, I am leaning towards paying it all as a lump sum just to have peace of mind, and pause IRA contributions for a few months.

cincystache

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mathematically 0% loan is optimal. I'd probably pay it in a lump sum and be done with it. It sounds like simplicity and peace of mind are important to you.

SweatingInAZ

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Have you tried asking for a cash discount? Ask for a 10% discount and they may counter with 5%. If you get it, that makes the decision easier.

mrteacher

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0% is indeed optimal! That's what has me considering not paying the lump sum even though I do prefer paying lump sum - but I typically don't have $10k lump sum payments!!

reeshau

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Have you tried asking for a cash discount? Ask for a 10% discount and they may counter with 5%. If you get it, that makes the decision easier.

0% is indeed optimal! That's what has me considering not paying the lump sum even though I do prefer paying lump sum - but I typically don't have $10k lump sum payments!!

+1 to negotiating a cash discount.  If the offer directly from your contractor, or are you looking at some 0%tease rate on a credit card.  Your contractor may think like you do:  nobody has $10 laying around, so they advertise financing.  But it does cost them something.

You should have seen the look on the face of the relatively-new car salesperson when I told her I was writing a check.  She had the financing paperwork half finished already, and literally didn't know what the dealership's process was to handle a cash payment.  I kept my cool so as not to unsettle her further, but laughed out loud about it as I drove off.

mrteacher

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The offer is directly from the contractor.

Rosy

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Good idea:) - Wells Fargo is offering a card with 18 months zero interest.

mrteacher

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I have some clarity: 0% financing is through a credit card whose company works with this contractor. I am leaning towards putting 50% cash down, and then getting my own 0% card for the last 50%.

Sibley

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I'm just going to post this because I'm not positive - but you do know not to pay in full before the job is done? right?

A fool and his money is easily parted.

mrteacher

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I'm just going to post this because I'm not positive - but you do know not to pay in full before the job is done? right?

A fool and his money is easily parted.

Yes. I would not pay the remainder until after the job is completed.

frugaliknowit

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Have you tried asking for a cash discount? Ask for a 10% discount and they may counter with 5%. If you get it, that makes the decision easier.

+1

My $.02:  If they are offering below market financing, there's enough margin for a discount.  Or shop for a cheaper quote.

DoNorth

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I did this many times over while building our house.

best scenario, find a card with a good sign up bonus and the interest rate offer you describe.  After the project is complete, set up equal autopayments for the duration of the 0%, contribute to your traditional IRA during that time to take advantage of tax savings with an end result of some extra travel points, still making IRA contributions, protections against contractor (which you often forgo when paying in cash) and your loan paid off interest free.