Author Topic: Pay off Car loan or not  (Read 868 times)

Maxman

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Pay off Car loan or not
« on: February 02, 2018, 10:44:20 AM »
Long story short. We have a car loan at 2.5% with about 15k balance. We came into some money about 150k spread out over the next 4 years (37.5k per year). My inclination is to put most in our Wealthfront account and keep about 20k for an emergency fund. We are in our early 60's and live off our IRA'a and SS. Our only debt is this one car payment. Do you think we should pay off the loan or not?

Dicey

  • Senior Mustachian
  • ********
  • Posts: 10478
  • Age: 61
  • Location: NorCal
Re: Pay off Car loan or not
« Reply #1 on: February 04, 2018, 08:46:51 PM »
Are you FI?

MEJG

  • Bristles
  • ***
  • Posts: 276
  • Location: Northeast US
Re: Pay off Car loan or not
« Reply #2 on: February 05, 2018, 05:23:43 AM »
Our car loan is at 2.1% and we've decided to create a "taxable offset" account for that 2.1% loan and one other 4% loan.  Payments for both are $593.57/month which is not a cashflow issue.
Once the taxable offset account hits the principle balance on both loans we'll reconsider our strategy. Both loans have a low enough interest rate that we have decided money in the market is a better choice for us.


Dicey

  • Senior Mustachian
  • ********
  • Posts: 10478
  • Age: 61
  • Location: NorCal
Re: Pay off Car loan or not
« Reply #3 on: February 05, 2018, 06:13:20 AM »
Our car loan is at 2.1% and we've decided to create a "taxable offset" account for that 2.1% loan and one other 4% loan.  Payments for both are $593.57/month which is not a cashflow issue.
Once the taxable offset account hits the principle balance on both loans we'll reconsider our strategy. Both loans have a low enough interest rate that we have decided money in the market is a better choice for us.
What you describe is also the most optimal way to manage a fixed, low interest rate mortgage. Unfortunately, OP has made their "long story" too short and has not provided enough information. Maxman, it is generally not good form to start a thread and then ignore it. Maybe it's not a real question, but a plug for the above-mentioned robot advisor. From their website:
"And as mentioned above, there’s another way to have more than $10,000 managed free under Wealthfront. After becoming a Wealthfront customer, refer friends to their service. Each new signup grants you an additional $5,000 of free management."
OTOH, there could very well be some other very good reason, including zombies.

frugaliknowit

  • Handlebar Stache
  • *****
  • Posts: 1662
Re: Pay off Car loan or not
« Reply #4 on: February 05, 2018, 09:02:40 AM »
Are you holding any bonds/bond funds?  To me it makes no sense to hold on to a loan that you can pay off if at the same time you have money in bonds.  Paying off the loan is a guaranteed 2.5% return, which is about the 10 year treasury rate.