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Still won't matter, after calculating the tax shield rate, the car loan is still much cheaper.
The simple answer is pay off the highest interest rate first. I have no idea how someone would react to not having a car payment. Some people get really excited and rush out and buy a new car. Someone else might get inspired and finally see the impact of buy now, pay later and decide that that brand-new 60" 4K TV isn't worth $100 a month in payments for the next seven years. I've seen both, but that's just anecdotal evidence and I'm no expert on psychobabble.
That psychobable is how people got in the mess they are in, you know, I'm buying this or that because I deserve it.
Still won't matter, after calculating the tax shield rate, the car loan is still much cheaper.
The simple answer is pay off the highest interest rate first. I have no idea how someone would react to not having a car payment. Some people get really excited and rush out and buy a new car. Someone else might get inspired and finally see the impact of buy now, pay later and decide that that brand-new 60" 4K TV isn't worth $100 a month in payments for the next seven years. I've seen both, but that's just anecdotal evidence and I'm no expert on psychobabble.
I would pay off the car loan first -- for one a car is depreciating but the house is an asset. I just buy cars with cash for that reason, I don't want to owe $10,000 on something that's now only worth $8,000.
Also you can lower the insurance money you're paying out if you own your car outright, you just need liability then.
I would pay off the car loan first -- for one a car is depreciating but the house is an asset. I just buy cars with cash for that reason, I don't want to owe $10,000 on something that's now only worth $8,000.
Also you can lower the insurance money you're paying out if you own your car outright, you just need liability then.
who cares if your car depreciates? its a tool not an investment. you own a car because you use it, of course its going depreciate. that logic has no place in a financial discussion. what matters is that you have debt with difference interest rates (cost of the money you borrowed). your cost for the money is much less with the car loan, so you pay it last. I have 2 car loans with 0% interest each. id love for them to be 100 year loans and I would never put anything additional to my car payment than the minimum required.
you are correct that without a financing company involved, you could reduce the cost of insurance. I don't know how much you would lower it and I don't know if that's really a good idea for most people.
i always find it funny when people use the "dont finance a depreciating asset" when talking about cars. i have no idea who convinced them of that making any sense whatsoever. i would finance my dinner if you gave me a low interest rate even though my dinner is worth absolutely nothing when im done with it, 100% depreciation! its not about the asset, its about the money you are spending. once im spending money on something, if i can get money cheaply then i would love to finance it. i can keep my cash so that i can invest it and watch it grow.
Spouting off a Roth, or IRA to somebody who hasn't a clue of either is bad advice. Not everybody can stomach the market swings or has the diligence to invest and hold the funds in retirement and will pull the funds with fees at the lowest point of the market and completely lose their ass-never again investing.
The OP was asking for advice on paying down the car or mortgage not worthless blanket investment advice.
My advice would be to pay down the car first. It's an asset that loses value every mile and year while your home will go up in value over the years.
The politicans are trying to cut social security spending. If she is not investing in an IRA/401k now, she will only have a token social security payment that may not cover the maintenance and taxes on that house.
My only regret is not investing in S&P index funds for my IRA, when I was younger.
Before you pay more on either of these loans, you should make sure you and your husband are putting the maximum amount in whatever tax advantage retirement accounts you are eligible for.......401K, IRA, ROTH IRA.
You should also have a liquid savings account of 1 years expenses in case of job loss or some other crisis.
Next, invest in something for long term growth...stock mutual fund.
I would pay off the car loan first -- for one a car is depreciating but the house is an asset. I just buy cars with cash for that reason, I don't want to owe $10,000 on something that's now only worth $8,000.
Also you can lower the insurance money you're paying out if you own your car outright, you just need liability then.
And? That doesn't mean it's a good idea to lower your insurance. From a quick web search, comprehensive insurance averages $136/year. Mine is a lot higher than that (very high car theft area). Insurance is insurance. Even if you can pick up an equivalent car for cash, that doesn't mean you necessarily want to. I'd rather pay the $200ish (can't remember exactly) for comprehensive than be out the ~$8,000 my car is worth. I also carry WAY over the minimum liability. I could eat an $8,000 accident from my car being stolen, a deer collision. I could not eat the medical bills. Been there, done that. Since the accident was not my fault, it wouldn't have really mattered. The insurance company settled up for nuisance money. Had it been my fault and I was potentially on the hook for $300,000 in medical bills and a wrongful death claim... well, that's why I have the insurance coverage I do. Not only do I not want to be financially ruined, I'd also very much like to make someone as whole as possible in the event I am responsible for severely injuring or killing someone. That's extremely unlikely, and I really hope I never am involved in another fatal accident, but that's why you buy insurance.
I'd pay off that car asap. The rationale is this if you pay off the car you get an immediate 4 to 500 dollar a month raise this will preferably fund your roth or 401k or even pay down your mortgage. But I don't recommend paying down the mortgage yet since I don't think you have either the roth or the 401k. But pay off that car asap. It's the easiest raise you will ever get.
I'd pay off that car asap. The rationale is this if you pay off the car you get an immediate 4 to 500 dollar a month raise this will preferably fund your roth or 401k or even pay down your mortgage. But I don't recommend paying down the mortgage yet since I don't think you have either the roth or the 401k. But pay off that car asap. It's the easiest raise you will ever get.
This would make sense if the interest rate on the car were high. But, if there is a 401k not fully funded it doesn't make sense because the reduction to taxes alone makes it smarter to go ahead and put the money to funding the 401k, not to mention any employee match that may be available.
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