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Thread: Should We Pay Off The Car?

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    #1

    Should We Pay Off The Car?

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    DH has about $5,700 left on his car loan. We have been paying off a lot of bills lately and we certainly have more than enough to pay off his car loan and still have a savings of several thousand dollars. The internet rate on the car loan is 4% and the pay off date is 12/21/2014. Should we just request a pay off amount from Chase and pay it off? Or just continue to make the monthly payments? If we do pay it off, we would take the amount of money that would be used for the car payment and just put it back into the savings account.


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    #2
    Save yourself months of interest and pay it off now.


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    #3
    Quote Originally Posted by Sinderelly View Post
    Save yourself months of interest and pay it off now.
    That is exactly what I am thinking! DH says otherwise and that we should pay it every month to improve his credit.

    I'm wondering if there is a way to see how much interest we would save and give the numbers to DH.


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    #4
    I bet someone has a calculator somewhere. How long have you been paying it on already? Years? I am no expert but I would think that if you have been paying on it for a few years or more already, paying it off early won't negatively effect your credit. I hope someone who knows for sure pops in here and tells you! We paid our car off about 9 months early (we had a 60 month loan on it) and we didn't notice a negative impact on ours.


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    #5
    Quote Originally Posted by Sinderelly View Post
    I bet someone has a calculator somewhere. How long have you been paying it on already? Years? I am no expert but I would think that if you have been paying on it for a few years or more already, paying it off early won't negatively effect your credit. I hope someone who knows for sure pops in here and tells you! We paid our car off about 9 months early (we had a 60 month loan on it) and we didn't notice a negative impact on ours.
    DH has been paying on it since January 2009. We would be paying it off a little more than a year early. I think you are right about it not negatively affecting DH's credit. Plus we would be putting an extra $300 a month into the savings account which would an amazing. It would help us build our savings back up as well as build a savings account that is strictly for when DH gets out when his contract is up. That's not for 3 more years but it is never to early to put money away for that but DH doesn't think so.


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    #6
    As long as you won't get a penalty for it I would pay it off early. I hate having loans.
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    #7
    It depends if you could invest that money at a higher interest rate than 4%. If you can then you should not pay the loan off.

    For example, DH's TSP has had an average annual return of about 9% and we have a car loan at 3% for his truck. We could pay off the truck loan early but it doesn't make sense to pay off something at 3% when we could instead invest the money at 9%.
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    #8
    is the car the only loan and/or credit you have?

    It is always better to pay off higher interest loans and credit first.

    And I concur with RetepDoc, it would behoove you to invest it for a higher rate (such as she described) than pay off a loan.

    If you don't pay it off, you can make higher payments to still pay it off sooner.

    There are 10 types of people in the world, those that understand binary and those that don't
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    #9
    simply yes.

    if your paying 4% on the loan and getting 2% for your savings your better off paying the car loan and then adding the money back to your savings.
    however do not pay off the entire amount if it will leave less than 3 months of income in your savings.

    the other thing you can do is pay off a big chunk now- leave your 3 months in savings - and pay as usual, once you get your savings back up- then pay it off or pay another big chunk.

    I really don't like to see people use all there emergency funds to pay off debt, as soon as you do something major happens and then your stuck creating debt again.
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    #10
    Is it simple interest or compound interest? My first car was simple interest so all the interest was added in the beginning and paying it off early wouldn't do me any good because I wasn't adding interest every month so it was better for me to make the payments and build credit. At least that's how it was explained to me If you have other debt I would focus on whatever has the highest interest first.
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