Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I'm always in favor of paying off the highest interest loan first. I don't know what your mortgage interest rate is, but I'll be surprised if it is lower that 1.75%. Unless it is cheaper money than the car loan, put your extra payments toward the mortgage.
Answer might be different today compared to last year. Because of the 24K standard deduction, you probably aren't getting a tax deduction from the house any more, so that's no longer a factor. If you think you can beat the mortgage + PMI by investing the money, invest. Otherwise pay down the mortgage to get rid of the PMI, then re-consider.
Ramsey's methodology has nothing at all to do with math - it has everything to do with psychology and his belief that most people aren't smart enough to think of the things you're contemplating.
There are absolutely times when you do really well with credit cards and there are certainly situations where you can make more money with your extra cash by putting it either toward mortgage debt or investments. Those pieces of advice for the majority of Dave Ramsey listeners would not be wise, because they generally don't have the discipline or education to understand them.
I equate Dave Ramsey's advice to AA. If you can't handle booze, don't drink. If you've shown that you can't handle credit, then use cash only. It's completely necessary for some people and I'm glad he's around for them, but if you question it, then you might have the discipline necessary to optimally handle your finances.
You are absolutely correct, its all about discipline when it comes to finances. I personally know somebody that just spent hundreds on Valentines day flowers candy, etc. but needs a new furnace and was using space heaters , this is up north where it gets cold
You are absolutely correct, its all about discipline when it comes to finances. I personally know somebody that just spent hundreds on Valentines day flowers candy, etc. but needs a new furnace and was using space heaters , this is up north where it gets cold
Unfortunately, that's an all too common occurrence. It seems like someone loses their entire house or worse due to a fire from space heaters on an annual basis.
Ramsey's methodology has nothing at all to do with math - it has everything to do with psychology and his belief that most people aren't smart enough to think of the things you're contemplating.
There are absolutely times when you do really well with credit cards and there are certainly situations where you can make more money with your extra cash by putting it either toward mortgage debt or investments. Those pieces of advice for the majority of Dave Ramsey listeners would not be wise, because they generally don't have the discipline or education to understand them.
I equate Dave Ramsey's advice to AA. If you can't handle booze, don't drink. If you've shown that you can't handle credit, then use cash only. It's completely necessary for some people and I'm glad he's around for them, but if you question it, then you might have the discipline necessary to optimally handle your finances.
This!
DR is for beginners. People who have gotten themselves into trouble and don't know how to get out. People can follow the step by step instructions and see visible progress being made, which encourages them to continue.
Once you have the basics down, and are out of any sort of high interest debt, are saving for retirement and have emergency funds, it is totally fine to be a fiscally responsible adult and carry some low cost debt while you put your money to better uses.
I was going to say that you shouldn't pay down either. Milk that low interest debt for as long as you can, while you put your money to work for you. But then I saw that you are paying PMI. That is a junk expense. If you can make that go away, you should asap. You get no benefit from it. So do what you need to to get rid of that, and then stop paying extra. Just make minimum payments and invest the rest.
I have a 3.75% mortgage that I'm in no hurry to pay off, and when I buy my next car (current car is 21 years young and counting), I will get a loan if I can get under say 3% and pay cash if I can't. I could pay my mortgage off now, but with investments doing so much better than 3.75%, why would I? Heck, even 60 month CDs are making 3% now, practically risk free, let alone other more aggressive investments.
DR is for beginners. People who have gotten themselves into trouble and don't know how to get out. People can follow the step by step instructions and see visible progress being made, which encourages them to continue.
Once you have the basics down, and are out of any sort of high interest debt, are saving for retirement and have emergency funds, it is totally fine to be a fiscally responsible adult and carry some low cost debt while you put your money to better uses.
I was going to say that you shouldn't pay down either. Milk that low interest debt for as long as you can, while you put your money to work for you. But then I saw that you are paying PMI. That is a junk expense. If you can make that go away, you should asap. You get no benefit from it. So do what you need to to get rid of that, and then stop paying extra. Just make minimum payments and invest the rest.
I have a 3.75% mortgage that I'm in no hurry to pay off, and when I buy my next car (current car is 21 years young and counting), I will get a loan if I can get under say 3% and pay cash if I can't. I could pay my mortgage off now, but with investments doing so much better than 3.75%, why would I? Heck, even 60 month CDs are making 3% now, practically risk free, let alone other more aggressive investments.
My most recent car loan was a $26k unsecured loan through Lightstream.com (a subsidiary of Atlanta-based SunTrust Bank) for 1.99% for 4 years. Of course, with recent rate increases they're now up to a minimum of 3.09%.
Paying off debt makes some people "feel" good. I feel good when my assets grow. I have a low cost auto loan that will be paid at the minimum for 6 years. In 2013 I bought a house. I could have paid for it with some of the equity from the sale of my former house. Instead I took out a loan for over $300K at 3.75% interest. The money I would have paid is part of my investment portfolio. In less than 5 years, I am now ahead about $100K after taking out what I have paid for the mortgage.
Paying off debt makes some people "feel" good. I feel good when my assets grow. I have a low cost auto loan that will be paid at the minimum for 6 years. In 2013 I bought a house. I could have paid for it with some of the equity from the sale of my former house. Instead I took out a loan for over $300K at 3.75% interest. The money I would have paid is part of my investment portfolio. In less than 5 years, I am now ahead about $100K after taking out what I have paid for the mortgage.
Years ago, I took out a nasty car loan with payments well above what I could really afford at the time. I was able to keep them up, though it was a burden. In 2016, I was about to lose my job, three years into the auto loan. Fortunately, I was able to keep the payments up, but the thought of losing the car three years in of high payments with nothing to show for it was terrifying. Once my financial situation stabilized, I paid the note down aggressively until I no longer had negative equity, then sold the car and paid cash for what I could afford at the time.
Long car loans with low payments are tempting. As long as you don't have a cashflow problem, it's not really an issue, but if you lose your job, something else happens, etc., you might not have the financial bandwidth to cover a payment.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
