If you could...

Beccagold · #1 (**permalink**) 07-31-2007, 02:56 PM

Would you pay off all debt besides your mortgage regardless of interest rates?

I'm expecting an extremely good bonus at the end of August. I would be able to pay off what's left of my student loan as well as both car loans. I have no CC debt, paid off my HELOC earlier this year and have 20k in EF.

This would enable me to invest/save this amount going forward or since the interest rates aren't that high (under 5% for each) should I invest the entire amount.

My thought was to pay them off to be rid of it and this way the money I save going forward would also benefit from dollar cost averaging. What are your thoughts?

Scanner · #2 (**permalink**) 07-31-2007, 03:01 PM

There's nothing like being debt free - tremendous psychological benefit even if yes, you do better longer by investing it.

disneysteve · #3 (**permalink**) 07-31-2007, 03:47 PM

If all the rates are under 5%, you could most likely do better investing the money, but I also agree that there would be a great psychological benefit to being debt-free.

lillyb · #4 (**permalink**) 07-31-2007, 05:00 PM

YES!!! The feeling of being free.. you just can't put a price on it. Go for it!!

simpleyme · #5 (**permalink**) 07-31-2007, 06:01 PM

yes pay those loans off and do not borrow any more money ;-) ever

Broken Arrow · #6 (**permalink**) 07-31-2007, 06:23 PM

Hmmm! That's a tough one. Although I would like to be debt-free, if it's more beneficial to invest, then that's what I would do.

Either way, it's a win-win.

LivingAlmostLarge · #7 (**permalink**) 07-31-2007, 06:43 PM

Depends on what you need. Either or is a win.

Vapors · #8 (**permalink**) 07-31-2007, 07:02 PM

If it were me I would pay off the debt. It's nice not being a debt statistic.

Beccagold · #9 (**permalink**) 07-31-2007, 08:34 PM

Well I'm glad to see most everyone is on the same page.

I have to admit I'm so excited at the prospect of being debt free. Thank you all so much for your advice!

Schadenfreude · #10 (**permalink**) 07-31-2007, 09:52 PM

Congrats on seeing a debt-free future!! Once that happens, just watch your savings skyrocket.

disneysteve · #11 (**permalink**) 08-01-2007, 06:29 AM

One thing to keep in mind - Once you pay off your car loans, be sure and designate a portion of savings to a car replacement fund. Cars don't last forever and ideally, the next time you purchase one, it should be with cash.

poundwise · #12 (**permalink**) 08-01-2007, 06:37 AM

Definitely.

For one, debt of zero (or no debt besides the mortgage) is a sure thing, investing is not. Also, the future is uncertain. Manageable debt today may be a source of extreme duress in the event of a major problem whether that be loss of job, loss of spouse, severe health problem, etc.

Besides, once you get debt free, then you can save and invest money that was going to payments.

Beccagold · #13 (**permalink**) 08-01-2007, 08:13 AM

Quote:

Originally Posted by disneysteve

One thing to keep in mind - Once you pay off your car loans, be sure and designate a portion of savings to a car replacement fund. Cars don't last forever and ideally, the next time you purchase one, it should be with cash.

Steve- That's definitely the goal. I have no intention of squandering the money. We live fine on our current budget, there's no reason for us to mess with it.

more freedom · #14 (**permalink**) 08-01-2007, 12:47 PM

I would compare the rate with my investment portfolio..

If my investment protfolio can give me higer rate compare to my debt rate, then I will invest my money first

Vapors · #15 (**permalink**) 08-01-2007, 01:24 PM

Quote:

Originally Posted by more freedom

I would compare the rate with my investment portfolio..

If my investment protfolio can give me higer rate compare to my debt rate, then I will invest my money first

I know of no guaranteed returns that is likely to produce that, especially after tax. It sounds like she will have future money inflows that she can invest anyway.

disneysteve · #16 (**permalink**) 08-01-2007, 01:39 PM

Quote:

Originally Posted by Vapors

I know of no guaranteed returns that is likely to produce that, especially after tax.

Investment returns aren't guaranteed, but I'm willing to bet that over the long run, a well-diversified portfolio is going to significantly outperform a 5% return.

Hot dog · #17 (**permalink**) 08-01-2007, 02:02 PM

I would do exactly as you are doing it just makes for less stress in the future.

boefixepa · #18 (**permalink**) 08-01-2007, 02:31 PM

I'm another vote for PAY IT OFF!!! It just feels so good and you will now be able to invest more. The difference is not going to kill you, I promise....it's worth the feeling!

Ima saver · #19 (**permalink**) 08-01-2007, 02:56 PM

I say pay it off too!! I have never carried much debt. Once I got my house paid for, I was really able to save even on a very low income.

n_vizion · #20 (**permalink**) 08-03-2007, 04:47 AM

Debt makes my stomach churn. You are blessed to have the opportunity to pay your debt off at once. Many people only wish for that chance. I say go for it! You will most certainly be glad you did.