Auto loan payoff? What would you do? (paying, transferring, credit)
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If paying out $5,000 is going to shrink your emergency fund by "A LOT" - don't do it. This is not an emergency.
Just pay extra $ towards the principal each month to get it paid off quicker. And continue to add to your emergency fund.
It would take half. I have thought about that too. I thought about paying 1.5 or double payments. When I make a double payment there's no interest paid on the second one. That was a nice surprise.
I would probably pay it off and focus on rebuilding the amount - it sounds like you are living with the car payment right now, so keep everything as is and pay that car payment to yourself
Some months there may be a minor shock that the now free car payment can cover
I don't see much purpose in having that money sit there doing nothing while paying 4% on an auto loan that you could pay off and lower the monthly outflow
*edit* - I actually like the double payment idea though as well, probably slightly prefer that
I'm on the side of PAYING IT OFF RIGHT AWAY, KEEP THE $20 YOU SAVE IN INTEREST EVERY MONTH TO BUY SOMETHING FUN FOR YOURSELF, AND FOR THE REST OF YOUR LIFE PUT INTO YOUR EMERGENCY/SAVINGS/INVESTMENT FUNDS WHAT YOU ARE PAYING ON THE LOAN AND HAVE FUN ENJOYING LIFE!
I would be saving $220 mo., that's true, and it could go right into savings instead of to the bank. I've thought of all sorts of scenarios. We'll see where it ends up...lol
I would probably pay it off and focus on rebuilding the amount - it sounds like you are living with the car payment right now, so keep everything as is and pay that car payment to yourself
Some months there may be a minor shock that the now free car payment can cover
I don't see much purpose in having that money sit there doing nothing while paying 4% on an auto loan that you could pay off and lower the monthly outflow
*edit* - I actually like the double payment idea though as well, probably slightly prefer that
This is, pretty much, the way I'm leaning. It's no hardship to make the payments but I wouldn't mind keeping it myself! Double payments would mean nothing out of the EF which is a good thing too and I can swing it most months.
So far I haven't had any minor shocks that I couldn't cover without using EF funds but you never know...
It would take half. I have thought about that too. I thought about paying 1.5 or double payments. When I make a double payment there's no interest paid on the second one. That was a nice surprise.
Forgot to add -
Just make sure there's no pre-payment penalty.
Some loans are still written that way!
Forgot to add -
Just make sure there's no pre-payment penalty.
Some loans are still written that way!
I thought about that too but haven't asked the bank about it yet. This has all been in the "thinking about it" stage for a while. I refinanced the car last May to get a lower interest rate and I mentioned to the gal that I "might" pay it off in the next 18 months. I still remember the surprised look on her face. lol Probably wondering how someone who makes what I make an hour could do that. I got the same look when she asked me what I made an hour and it was higher than when I bought the car. I told her it was going to go higher in two months. lol Probably most of her customers don't get regular yearly raises?
Oh, and another thing...I'm thinking about cutting my hours a little bit and thinking that getting rid of the car payment would be a boon. I'm part time now but it almost feels like full time sometimes. What's held me back this far is that vacation, PTO hours and bonuses are partly based on average hours worked so don't want to short myself. There's not that much difference though.
I don't actually HAVE a designated EF. It just all goes into one account and accumulates there. I use out of it as needed, which is rare. It's there for just in case I need to replace something but so far I haven't had to use it. So far I've replaced a swamp cooler and paid over $800 for some serious plumbing issues but didn't use EF funds. Also had a $500 deductible for a car repair. So the EF is 'just there'...in case I don't have the money in checking. The loan is about 4% interest. My EF is lucky to garner 1%!!
Emergency fund has nothing to do with a separate account. It's a rough amount of money that's liquid. Mine is in a combination of checking and savings. The point of an EF isn't to get interest, it's to have money on-hand in case of an emergency. $3k doesn't sound like enough, but I don't know what your expenses are. If they're $500 or so a month, it's about right. Six months is a good number, beyond that your beginning to have too much sitting around idle getting eaten away by inflation.
At 4%, I'd pay it off above six months of emergence fund. As someone else said, make sure there's no prepayment penalty. No reason to give someone else money if they're just going to collect the interest anyway.
Emergency fund has nothing to do with a separate account. It's a rough amount of money that's liquid. Mine is in a combination of checking and savings. The point of an EF isn't to get interest, it's to have money on-hand in case of an emergency. $3k doesn't sound like enough, but I don't know what your expenses are. If they're $500 or so a month, it's about right. Six months is a good number, beyond that your beginning to have too much sitting around idle getting eaten away by inflation.
At 4%, I'd pay it off above six months of emergence fund. As someone else said, make sure there's no prepayment penalty. No reason to give someone else money if they're just going to collect the interest anyway.
Yes, I know. All my funds are "liquid". And I guess I shouldn't call it my EF if it's just a plain ol' savings account. lol It's for whatever I need it for. Vacations and road trips come out of it, sometimes. The money is there to pay for it before I leave the driveway.
I like to have about a years worth in savings. $3,000 would last me three months but with my SS checks I could stretch it to six. I did it for nine months once so I know I can.
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