This is not strictly a math question. What would you do, taking math, emotions, personal preferences - everything into account?
I need to decide before EOD today (my self-imposed deadline) how to pay for my solar panels.
Options are:
1. Cash: $19,728.00
If I pay cash, I can pay using credit card, earning 2.55% in points.
2. 10-Year Loan @3.99% APR
If I pre-pay them my federal tax credit (26%=$5129.28) before the 18th month: $152.28 / month.
If not: $152.28 for the first 18 months, $211.66 afterwards.
3. 20-year Loan @4.99% APR
If I pre-pay (like above): $99.35/mo
If not: $99.35 for the first 18 months, $134.78 afterwards.
I have $45k in emergency fund (had $48k, just paid off roof+driveway cash -> $37.XXk, now it has built back up to $45k).
The other loans I have are:
Mortgage @3.25%, 12 years left. Balance is $173k. I expect to do a cash out refi of my house once/if the rates go another half to one percentage point lower.
Car note @1.74%, will end sometime in 2021.
ctheatloan (for gas conversion) @0.99%, balance $9.4k.
Mathematically speaking, option 3 wihtout the pre-pay is the clear winner. Get the use of someone else's money @5%. Pre-pay whenever you want (selling house, maybe just ticked off by the loan, whatever). But I am just a little ticked because I *emotionally* prefer to have no loans, and that I have been collecting all these loans with the same logic. It's up to three now - car note, ct heat loan, and now the solar loan. If I do the cash out refi - that would be a fourth one. At some point of time, it just gets tiring and irritating to manage all these payments every month.
What would you do? What have you done? With so much cheap money around, many of you must have faced this.