What would you do? Loan payoff question.

It sounds good to me.

That’s what I would do. And start saving the car payment amount for something else.

@chyna that’s what I am leaning towards.

Pay off the car and start putting the car payment money into a different interest account. A Credit Union might give better interest.

Thats right pay it off, 3% it is coming out of your pocket. Put the future payment amounts into a savings account. Yes I know (1.25%) but pay to you not the loan company.

I’d pay it off.

Pay it off.

I’m not a numbers person, but that sounds intuitively right to me.

Not necessarily a no-brainer, though. Maybe just a light-duty brainer. Thinking it through first makes more sense than not thinking.

There are valid arguments to reinvest the money.
However, I would pay it off.

A wealthy astute neighbor told me to get a Tangerine savings account as many other Banks offer much lower interest rates on savings…here is a link ( I think Canadian, but they are world wide).
For the first six months, the Tangerine Savings Account offers an interest rate of 1.90% as well as up to $25 in bonuses. Increase that to 2.40% for the remainder of your first 6 months if you also open a Tangerine Chequing Account.

Compare the Best Tangerine Savings Accounts in Canada…www.ratehub.ca › savings-accounts › accounts › tangerine

Put the CD into a higher interest savings acct and pay off the car with the interest that you will receive on that full amount that you put in. ( Just my opinion).

Why not make that CD earnings work for you rather than lose it to a Car loan company.

” What am I missing? Why not pay off the vehicle?”

One could make the argument that there is a chance we could see extreme (or at least very significant) inflation in the not-too-distant future. I’m not saying this will happen, but there’s certainly an elevated risk for this. If such a thing were to happen, you’d be paying off your loan with “cheaper” dollars, possibly “much cheaper” dollars, while having the cash-on-hand to invest your wealth and keep pace with the rate of devaluation. Buying CD’s in that scenario wouldn’t cut it though.

I am not a financial adviser, this is not financial advice, you should talk to a qualified financial professional for actual financial advice. I certainly don’t know what the right option is for you and your situation. I just put out a possible alternative perspective to illustrate at least some risks from the other side.

@gorillapaws that’s a good point. Actually I considered that last night – what happens if interest rates go up, and what that would mean both for long term CD yields and for paying things off with cheaper dollars.

Everything I have read in the last 6 months is that low rates are to stay for the foreseeable future; at least for the next couple of years. Your point is a good one, but I just don’t see interest rates going up significantly for some time to come. (At least until my vehicle is paid off)

Regarding rates going up, they are not up yet, and will likely not reach 3% for at least a year even if they started to creep up. Of course, none of us can know for sure. If you pay off the loan, you will quickly be saving the money you had been paying the loan with every month. In a year you will have more than $4,000 back in the bank in your scenario. I think most likely you come out ahead, or at worst will be even, even if interest rates go up. Plus, you don’t have the payment, and it is always nice to reduce bills. The calculation might be different if we are actually talking about $60K instead of $12K, but I am assuming the real numbers are not that far from your example numbers.

@JLeslie thanks. I agree with your thinking. And you’re correct, the numbers I’m dealing with are in the neighborhood of 12–13K.

Suzy Orman always says pay off your debt first.

Sound like a plan to me!

If you can’t invest it for more than you are paying on the vehicle, pay off the vehicle. We did that with our house. I had a good interest rate for a home loan (4.2%), but we ended up with enough money to pay off the house. We could invest it and make 3% on it, but that still meant we would be paying extra off. And paying off the house was a huge load lifted off. It is very liberating.

@seawulf575 yep, talked with the woman at the credit union this afternoon, got the payoff amount. I’ll do the paperwork tomorrow. Looking forward to not having a car payment.

Update: Transaction complete. Vehicle is paid off. Remaining balance is in a new CD.

@elbanditoroso Congrats on your loan being paid off. I know that’s got to be a great feeling!

@elbanditoroso Congrats!!

Did you get a CD with a good rate?

@JLeslie 1.25% which seems to be the best I can find in the Atlanta area. (13 months)

Not bad.