Fleainat

I wanted to get your opinions on what to do. Basically, I have an 06 IS350 which I bought new in late 2006. Between my year end bonus and tax refund, I have come into a bit of extra cash and I'm thinking of paying off my IS about 2.5 years early.

Basically, I owe $10k more on the IS, at 6.95% interest. I also have a home and a HELOC, both at lower interest (and they're deductible), so I want to get rid of the car loan asap. But, I have about $10k in cash, so if I pay off the car, then I won't have any savings (except just enough to cover prop tax, etc.).

So, should I:

1. Pay off the car using my savings? I will no longer have a $520 monthly payment; or
2. Keep the cash and keep paying for my car every month?

I'm very inclined to just pay it off and struggle for a few months, rather than keep paying this high interest... Any strong reasons for one option over the other? Thanks!

montgb

iTrader: (7)

How secure is your job?

It's never a good idea to drain your savings - that leaves you exposed in the event of a lay-off or other misfortune. I think the general rule of thumb is to keep enough savings to cover at least 3 months of expenses.

projectdna

iTrader: (56)

cash is king.

a dollar today will not be worth a dollar tomorrow.

imo, save your money and continue to pay off your 2is.

you never know what might happen in the next few months; better to play it safe than to get into financial crisis.

montgb

iTrader: (7)

Or...take half that 10K and invest it. Lots of undervalued stocks out there right now!

projectdna

iTrader: (56)

^ investing in the stock market?

the way things are looking, i'd avoid any investing altogether.

asianfob

Too many factors to look into. Family matters (do you have many children in college and need to pay their tuitions), what is your income?, how often do you get paid?, what are your necessary expenses?, what are your liabilities?, are your job(s) secure?, many of these are personal, so you should ask a friend. But it does seem like you should have cash on hand if you have no savings. And DO Not invest if you are not an expert since it looks like money is tight for you and the stock market will fall even more.

panther28

iTrader: (8)

I would say keep the cash and continue paying. It is better to have some many in case of an emergency.

jewel

Get rid of your debt. Those telling you to invest now are crazy. You will be hard pressed to find something that yields 6.95 percent so why not pay off the loan? I would save 2-3 months worth of expenses and pay down your loan with the rest. That way your interest payments will be less.

Fleainat

My job is ultra secure and I have no concern of losing my job. I run a law firm and I control 100% of the finances, so I know we're doing very well.

I make great money for a 25 year old, approx. 10k/month before taxes; my only debts are my mortage and my car; I understand that it's good to have cash, but I feel that if I really needed it, I could easily tap into my $50k of unused credit on my credit cards in a worst case scenario (I currently pay my credit card in full). And, if I have no more car payment, it's one less debt to worry about. My concern with keeping my car loan longer than necessary is that I will artificially think I have more money than I actually do -- which will lead to spending more on luxuries...

So it sounds like most are saying to not pay the car off?

Recluse

Neither your balance nor your interest rate are exceptionally high, and having no savings (especially during a recession) doesn't seem like that great of an idea, so I'd suggest you hang onto the funds and just make normal payments.....

EJC

It sounds like you are 1/2 way through a 5yr loan
I believe car loans are front loaded on the interest.
Check with the bank, you may actually have already paid most of the interest and you are probably paying down principal more than interest.

You may be better off keeping the loan as long as you're happy with the car

Check w/ the bank they should be able to give you a payoff sheet so that you can see what the monthly breakdown of interest and principal is

pisaykotik

Save up 3-6 months worth of "emergency fund" (personally I don't like the idea of using credit cards as backup) simply because you'll never know what happens next THEN pay off your car loan.

IS-SV

Agreed, or just download a loan amortization spreadsheet off the internet and review payoff analysis yourself. I agree cash is king. Don't be afraid to do some selective stock investing too, there are some nicely discounted share prices of quality companies today.

camerri

pay off the loan. Your cash flow will go up and you start saving that extra $500 every month. You didn't have the money before, now you'd at least be saving. Plus you aren't giving money to your bank every month.

jns350

iTrader: (7)

Dump the loan...and rid yourself of interest payments...And you will be surprise how 520 less a month feels after you pay it off....If you had the loan under your mortage (equity)then that would haved benifit you tax wise....