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05-04-2009, 09:18 PM
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Pay back my car loan or stay put?
I have a car loan of 15K @ 2%. I have set aside 15K for this which is currently earning 5% in savings account. (rate is confirmed till the end of year. if rate changes after that, I will move it to other bank that has high interest rate at that time).
I recently received a letter in mail from my local credit union about a promotion. The offer is that they would make first payment of car loan up to $400 if I finance my car loan from them. Do you guys think it will make sense to take a loan from this bank, have the first $400 paid from the bank and pay back the remaining amount (14.6K) in full from the funds I have set aside for this loan? I am not concerned about new interest rate since I am planning on immediately paying back in full in second month. This is free $400 towards my car payment in the end if I am not calculating wrong. Thanks in advance for your advice folks. 
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05-04-2009, 11:28 PM
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I see no problem with it. However, I'd at least consider the interest rate; if it's less than the 5% you are earning, just keep savings where they're at. And pay off as you come into new dollars.
Check into "early" payoff terms... they often tie "time" into the $400 offer. BTW, that 5% is a great interest rate in today's terms.
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05-05-2009, 05:08 PM
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I agree that it probably isn't that easy. The CU probably has terms written in to prevent you from doing that. They aren't going to "give" someone $400 unless they expect to make it back. Check the terms. Also, check if you are even eligible since this isn't actually a purchase but rather a refi.
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Steve * Despite the high cost of living, it remains very popular. * Why should I pay for my daughter's education when she already knows everything? * There are no shortcuts to anywhere worth going.
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05-06-2009, 03:04 PM
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Car dealerships make a lot of money off the sale of the financing. Dealerships used to be quick to finance someone on the spot, in house, then sell the loan to a big bank or something. The credit union makes their money off the interest too, but if they are paying out $400 for moving it to them, there is a good chance it has an early pay off penalty. If there isn't, then by all means pay it off.
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