At 9% it’s not even a question in my mind and should be paid off asap but make sure you still have your 3-6 month emergency fund in tact. Dont dip in that deep.
ZebraMussell on
Pay em off and start investing the saving monthly
Holding $55,000 in a savings account while paying 9% on a loan means you are probably maybe losing 4-5% of your money’s value every year to the bank.
Mysterious_Might008 on
Add me to the chorus of paying off those 9% loans. It is practically a guaranteed after-tax 9% gain.
Very very very hard to beat a guaranteed 9% return over the remaining 4 years of those loans. Use $1,000 of the free cash flow to plump up your emergency fund until you have 12 months’ expenses. Then, put half towards new car fund. (The last $500 can go towards home repair, college fund for your kids, or some other goal.)
Use the current remaining $400 to add to your future car fund – that way, you have a good chunk of cash to buy outright or as a big down payment.
RealKunfupanda on
Advanced professional trading is making at list 38% profit on capital each day. You should try it
Farmer_Pete on
I would either pay off most of the loans, leaving $10k or so in savings, or I would go to my credit union and refinance my car loans to something reasonable. No way would I pay 9% interest on 47k to invest. And it sounds like you aren’t even investing, you are just sitting on cash. Hit that debt hard.
sly_1 on
$1400/mo is $16.8k/yr
Investing $55k will not produce $16.8k/year without accepting tremendously high risk.
For context, you’d need to exceed a 30% to outpace the savings from paying the loans.
You do you but imo pay the loans, then RELIGIOUSLY INVEST not only the $1400/mo saved from the loans but also RELIGIOUSLY INVEST the monthly largess that allowed you to save up the $55k in cash.
So ex: if you had an extra 2k/mo and saved that until you hit 55k, that means you have 3.4k available to invest monthly (the 2k plus the 1.4k saved above).
Do that every month without fail and financial freedom will come into view within a couple of decades.
Sammy_Henderschplitz on
pay them off, you’re burning money as you speak. in general only invest the cash if the interest rate your paying is lower than what you can get in a short term treasury bond. right now they’re at 4% so best you can do is net -5% on that money. if it were say 3% that you’re paying on the car, you could invest, use the 3% part of the interest you receive to pay the loan, then pocket the remaining 1%.
unwaveringwish on
Nine percent? Make a plan to pay them off over the next few months and make sure you have an emergency fund first. The economy is doing a lot
aycockonxion on
Pay. Off. The. Debt. PAY OFF THE DEBT!!
Hazelbutt207 on
Is the 55k your emergency savings? You shouldn’t drain that entirely. Keep at least 3 months expenses, focus on one of the cars first and then maybe look into selling or refinancing the other. 9% was an irresponsible amount of interest to sign yourself up for.
Electronic_Egg_9785 on
Pay off the loans. Then put that $1,400 per month into your emergency fund.
Due_Night414 on
It’s the car loans first. Not paying 9% will make you money. Not sure how you have your cash on hand. I’d think that’s 6-12 months emergency fund so maybe in some sort of savings?
Pay off the loans, put the $1400 back each month into a HYSA. You won’t be missing the $1400/month since you’re used to paying it already. And your savings will get filled back up soon and with interest fully gained.
Appropriate-Price73 on
Thanks for all the replies. Based on those, my current plan is to pay off and keep my main vehicle and then sell the other vehicle back the dealership, paying off any negative equity. That should cost about 37-40K altogether, which leaves me one car less but some more money in my pocket (one car, the one I will keep, is a ford fusion while the other is a “Sunday funday” Miata convertible. I have decided I can live without it)
momofuku18 on
The default answer is paying it off. Do read the contract though to see if there are any penalties for prepaying the loan off early. It may negate the benefits of paying off the entire balance, and if so, you have to run the numbers.
elusivefuzz on
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
elusivefuzz on
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
elusivefuzz on
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
elusivefuzz on
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
elusivefuzz on
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
Few-Lengthiness-2286 on
Pay it off immediately and drive those cars until they break down in a few decades
Playful-Glove8918 on
A lot of info missing to give you a good recommendation. I would want to know what other debts you have, how much income you make and is it consistent or fluctuats, how much do you spend monthly, what’s your credit score. Professional advisors will want to look at the whole picture not just the small set of facts as every decision you make impacts the rest of your balance sheet. Reddit advisors will try and help but recommendations will be made off limited information and it always makes me think of the old adage “garbage in, garbage out”. No knock on the Reddit advisors, have to work with what you have.
strangebloke1 on
The basic rule with all savings/debt questions is about the rate. It’s pretty rare for investments to consistently get better than 9% even if you go for something like a stock/index fund (which would strictly be for money you aren’t going to need on short notice)
The other question is an emergency fund. The idea of an emergency fund is pretty simply that if you have costs come up (and realistically even absent job loss you will) you’d have to get loans to finance those expenses, usually at a higher than normal interest rate via credit cards. So here the tradeoff is between 28% for a credit card, versus 9% for the auto loans. This is enough to justify keeping some amount back. 3-6 months is what people recommend as a heuristic but there’s no rule here.
Note though that if you have a plan to get money for less interest than 28% (which is very doable. 0% APR loans are a thing) this tradeoff becomes less true. So personally I’d go down to 1-3 months in savings to get the car loans paid off.
megapillowcase on
Always, always, always pay off high interest debt first. Or any debt for that matter. Nothing feels better than owning every cent you earn.
24 Comments
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics.
debt or invest: https://www.bogleheads.org/wiki/Paying_down_loans_versus_investing https://reddit.com/r/personalfinance/comments/16jcmnh/_/k0qox0x/?context=1 https://reddit.com/r/personalfinance/comments/zssug0/_/j1ddljd/?context=1
At 9% it’s not even a question in my mind and should be paid off asap but make sure you still have your 3-6 month emergency fund in tact. Dont dip in that deep.
Pay em off and start investing the saving monthly
Holding $55,000 in a savings account while paying 9% on a loan means you are probably maybe losing 4-5% of your money’s value every year to the bank.
Add me to the chorus of paying off those 9% loans. It is practically a guaranteed after-tax 9% gain.
Very very very hard to beat a guaranteed 9% return over the remaining 4 years of those loans. Use $1,000 of the free cash flow to plump up your emergency fund until you have 12 months’ expenses. Then, put half towards new car fund. (The last $500 can go towards home repair, college fund for your kids, or some other goal.)
Use the current remaining $400 to add to your future car fund – that way, you have a good chunk of cash to buy outright or as a big down payment.
Advanced professional trading is making at list 38% profit on capital each day. You should try it
I would either pay off most of the loans, leaving $10k or so in savings, or I would go to my credit union and refinance my car loans to something reasonable. No way would I pay 9% interest on 47k to invest. And it sounds like you aren’t even investing, you are just sitting on cash. Hit that debt hard.
$1400/mo is $16.8k/yr
Investing $55k will not produce $16.8k/year without accepting tremendously high risk.
For context, you’d need to exceed a 30% to outpace the savings from paying the loans.
You do you but imo pay the loans, then RELIGIOUSLY INVEST not only the $1400/mo saved from the loans but also RELIGIOUSLY INVEST the monthly largess that allowed you to save up the $55k in cash.
So ex: if you had an extra 2k/mo and saved that until you hit 55k, that means you have 3.4k available to invest monthly (the 2k plus the 1.4k saved above).
Do that every month without fail and financial freedom will come into view within a couple of decades.
pay them off, you’re burning money as you speak. in general only invest the cash if the interest rate your paying is lower than what you can get in a short term treasury bond. right now they’re at 4% so best you can do is net -5% on that money. if it were say 3% that you’re paying on the car, you could invest, use the 3% part of the interest you receive to pay the loan, then pocket the remaining 1%.
Nine percent? Make a plan to pay them off over the next few months and make sure you have an emergency fund first. The economy is doing a lot
Pay. Off. The. Debt. PAY OFF THE DEBT!!
Is the 55k your emergency savings? You shouldn’t drain that entirely. Keep at least 3 months expenses, focus on one of the cars first and then maybe look into selling or refinancing the other. 9% was an irresponsible amount of interest to sign yourself up for.
Pay off the loans. Then put that $1,400 per month into your emergency fund.
It’s the car loans first. Not paying 9% will make you money. Not sure how you have your cash on hand. I’d think that’s 6-12 months emergency fund so maybe in some sort of savings?
Pay off the loans, put the $1400 back each month into a HYSA. You won’t be missing the $1400/month since you’re used to paying it already. And your savings will get filled back up soon and with interest fully gained.
Thanks for all the replies. Based on those, my current plan is to pay off and keep my main vehicle and then sell the other vehicle back the dealership, paying off any negative equity. That should cost about 37-40K altogether, which leaves me one car less but some more money in my pocket (one car, the one I will keep, is a ford fusion while the other is a “Sunday funday” Miata convertible. I have decided I can live without it)
The default answer is paying it off. Do read the contract though to see if there are any penalties for prepaying the loan off early. It may negate the benefits of paying off the entire balance, and if so, you have to run the numbers.
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
Sell the cars, pay off balances, buy used vehicles for cash, then invest the difference.
Pay it off immediately and drive those cars until they break down in a few decades
A lot of info missing to give you a good recommendation. I would want to know what other debts you have, how much income you make and is it consistent or fluctuats, how much do you spend monthly, what’s your credit score. Professional advisors will want to look at the whole picture not just the small set of facts as every decision you make impacts the rest of your balance sheet. Reddit advisors will try and help but recommendations will be made off limited information and it always makes me think of the old adage “garbage in, garbage out”. No knock on the Reddit advisors, have to work with what you have.
The basic rule with all savings/debt questions is about the rate. It’s pretty rare for investments to consistently get better than 9% even if you go for something like a stock/index fund (which would strictly be for money you aren’t going to need on short notice)
The other question is an emergency fund. The idea of an emergency fund is pretty simply that if you have costs come up (and realistically even absent job loss you will) you’d have to get loans to finance those expenses, usually at a higher than normal interest rate via credit cards. So here the tradeoff is between 28% for a credit card, versus 9% for the auto loans. This is enough to justify keeping some amount back. 3-6 months is what people recommend as a heuristic but there’s no rule here.
Note though that if you have a plan to get money for less interest than 28% (which is very doable. 0% APR loans are a thing) this tradeoff becomes less true. So personally I’d go down to 1-3 months in savings to get the car loans paid off.
Always, always, always pay off high interest debt first. Or any debt for that matter. Nothing feels better than owning every cent you earn.