In August I asked you, my readers, “Should I pay off my 0.9% car loan?“. If you’re new here or haven’t had a chance read that post first for some background. There were many different opinions on what I should do. After a few weeks of considering the facts I’ve finally come to a decision. However, first I’d like to take a minute to explain my thoughts on some of the comments I received.
Invest the Money
Right now the money to pay the loan off is in a savings account. That is about as safe as you can get (for the most part) and ING Direct is only paying 0.8%. Many readers pointed out that it would be pretty easy to get more than the 0.9% return I would need to break even if I invested the money.
I do think it’d be pretty easy to get more return but it would definitely come with risk. If I had a much longer time frame to pay the loan off I’d consider investing in more conservative investments. With only a few months left I didn’t want to risk losing the money I have set aside to pay the loan off just to make a few dollars in investment income.
Pay More Per Month
A few readers suggested that I increase my payment amounts to pay the car loan off faster. This was definite a possibility but didn’t make much sense to me in this situation. I feel this is a great thing to do if you don’t have the money to pay a loan off. I do have the money though so paying it off a little faster by increasing my payments wouldn’t be much different for me.
There isn’t any measurable financial gain with my interest rate being so low so I ruled this option out pretty fast. It’d be great if I was paying off credit card debt though!
Continue On As Normal
This was the option I was leaning toward before I wrote “Should I Pay Off My Car Loan?”. A couple readers suggested I follow this option to keep the cash available should I need it. I wouldn’t be losing much money but I definitely wouldn’t be making any money either. I do have other sources of cash available should I need them but having even more doesn’t ever seem like a bad idea to me.
Pay It Off Today
The final option that was suggested was just pay the car loan off today. Some readers said that investing the money wasn’t worth the risk and since I was actually losing money I should just pay the loan off today. I had already received the benefit of having a car loan in regards to my credit score. After all, one of the reasons I took out a loan was to improve my score for when I would eventually take out a mortgage. Some readers also noted the fact that the amount left on the loan wasn’t much anyway so why bother making payments any longer.
So What Did I Do?
I decided to pay my car loan off after considering all of the facts. Investing the money was too risky for me as my time frame was too short. If I was going to pay any extra on the car loan I wanted to just pay it in full and I felt I had enough other cash to cover any needs that might arise in the next few months before the loan would have been paid off anyway.
I had originally decided just to wait it out and pay the car loan according to schedule. The problem was I kept thinking about whether I should pay it off or not. It eventually got to the point where I decided it’d just be easier to quit worrying about it and pay the car loan off so that’s exactly what I did!
Did you think I’d end up paying off the car loan early? Have you had any debt pay off successes lately?