Author Topic: What would you do?  (Read 1234 times)

LiseE

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What would you do?
« on: February 18, 2015, 12:45:47 PM »
You receive $20,000.00. 

  • You owe this exact amount on a 401K loan
  • You have a 14K car loan at 1.9%

Which would you pay off?  The 1.9% interest rate is almost like free money and the interest that I could be earning on the additional 20K in my 401K account would definitely outshine that 1.9% ... I'm leaning toward paying off the 401K loan.

What would you do?


Terrestrial

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Re: What would you do?
« Reply #1 on: February 18, 2015, 12:50:37 PM »
Pay off the 401k loan.  That 20k that is outstanding is money that ISN'T in the market and earning in your 401k.  The expected return on that is much better than the 1.9% car note.

Another important reason:  If you are terminated/quit many 401k's have a provision that the outstanding loan balance is due immediately.  If you couldn't pay that off with cash on hand, even more reason to wipe out that loan.  A standard car note can never be advanced to a balloon payment like that.
« Last Edit: February 18, 2015, 12:56:07 PM by Terrestrial »

ShoulderThingThatGoesUp

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Re: What would you do?
« Reply #2 on: February 18, 2015, 12:55:11 PM »
If you owe your 401k $20,000, you probably shouldn't have a $14k car. What's the value of the car?

zoltani

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Re: What would you do?
« Reply #3 on: February 18, 2015, 01:22:15 PM »
If you owe your 401k $20,000, you probably shouldn't have a $14k car. What's the value of the car?