The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: hpb on October 19, 2015, 07:04:25 PM
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Just want to get some opinions and see if I'm thinking correctly. If I'm missing something please point it out.
I have two car loans, I know but stay with me.
$8k @1.99%
$15k @1.49%
However, I have the money to pay this off spread out in rewards checking earning 3%. Therefore, I'm earning a positive spread. Obviously not really a whole lot of money being earned on the spread now, but could change if and when rates move.
Question- What's your thoughts on not paying these off since the rates are so low? Am I missing something focusing only on this spread?
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Unless you need some sort of mental gratification, paying those off would be a poor choice nearly any way you look at it. Obviously your semi unbelievable 3% checking account is earning more. Or you could invest in VTSAX, 401k, Ira, etc, would all likely be better ways to spend that money.
I'm genuinely curious what possible logical reason you would have to pay this off?
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The only reason I'm thinking about it is to invest the cash flow from not paying the payments.
As it sits now I'm leaving it in reward checking for the lack of principal risk. As I said the spread isn't bad right now (when not considering inflation)
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Unless you need some sort of mental gratification, paying those off would be a poor choice nearly any way you look at it. Obviously your semi unbelievable 3% checking account is earning more. Or you could invest in VTSAX, 401k, Ira, etc, would all likely be better ways to spend that money.
I'm genuinely curious what possible logical reason you would have to pay this off?
Lols. 3 percent checking accounts are real! Lake Michigan Credit Union has one I use: lmcu.org
Anywho, just pay the min and invest the rest. Not sure the money needs to sit in a checking account when it could be put into a Roth account, 401K or something else making more.
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Almost forgot! Make sure your not paying extra for car insurance by having the loans.
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I did this for awhile, until I reduced my spending so much that I couldn't find ways to meet those minimum debit-card purchase requirements. That is when I paid off the car. This strategy doesn't make sense unless your optimized budget has you making 10-15 (or whatever your requirements are) POS purchases a month.