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    truck debt

    Is it dumb to pay off a 2.1% truck loan early? I owe $13000 and its worth probably $30000. I have the cash but like it in the bank also. Loan is $291 a month.

    #2
    Welcome to SA. Ir's impossible to offer an opinion without some facts. Will $ 13,000. clear the cash? Do you have any goals/plans for the sum saved? DO you have an emergency fund? Are you near retirement? Do you have a retirement plan?

    What bothers you about the truck loan? Why does it need to be all or nothing? Would you be happier making larger payments with the extra sum going directly to the principal?

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      #3
      I am 32 years old. And it will cut into my emergency fund a bit if I pay it off. I have about $40000 in roth ira for retirement. The only other debt I have is my house that I owe about $70000 and worth about $200000. 10 years left on the loan.

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        #4
        You will rarely regret paying something off and cleaning up a debt.
        Last edited by Fishindude77; 05-20-2015, 05:18 AM.

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          #5
          Do what makes you feel better. If you are thinking about it, that means the loan bugs you. I was in a similar spot but with 4 car loans. Some at 0%, some at 1.9%, total monthly payment was $2,000. I could afford the payments and had enough cash to pay them off. Like you, I was worried about not having access to the cash.

          I paid them all off and have never looked back. What a relief to not owe anyone a dime except my house, which now that I have paid off the cars, I would love to pay that off as well.

          Some things that happened after I paid off the cars:

          1. I felt liberated. I have never not had a car loan, ever. Felt great.
          2. Emergency fund required level went down. Removing that much monthly payment from the EF amount significantly reduced the required balance to achieve 6 months of EF.
          3. Monthly savings went way up. I found myself just putting money into a savings account because I now had enough cash flow to fund all my retirement accounts, all my other funds, and still have a little left over. Instead of spending it, it just accumulates in a savings account.
          4. Here's the biggest one: I won't buy a new car because I don't want another car payment and I don't want to tap into my car savings to pay cash. If I still had a payment, I would be tempted to just trade a $500 / mo payment on a 3 year old car for a $500 / mo payment on a new car (that was my disease). This is huge for me as I am now driving a 7 year old truck that is in perfect shape and I find myself longing for that new car smell. But the monthly budget cannot handle a car payment (because everything is going to savings) and I cannot pry the $20,000 out of the car savings account. So I wait and hope for the truck to explode. It hasn't.
          5. I started wondering if I could get another job that doesn't have to pay as much. This was unexpected. In order to fund my old lifestyle, I had to have a very high paying job. Now that the cars are paid off AND I have adjusted my spending overall, I find myself wondering what it would be like to get a job I might enjoy more but pays less. I can't make that change just yet as I have some more years of saving to do, but what a great feeling knowing I can walk away from this job any time and get one I might enjoy more but pays less and still cover all my expenses (just won't be saving as much). That also is very liberating.

          Sorry for the diatribe. Everyone is different and you may wish you had the security of the savings vs. a paid off car. Do what makes you happy.

          Tom
          Last edited by corn18; 05-20-2015, 03:27 AM.

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            #6
            Originally posted by rockrv22 View Post
            Is it dumb to pay off a 2.1% truck loan early? I have the cash but like it in the bank also.
            Originally posted by rockrv22 View Post
            it will cut into my emergency fund a bit if I pay it off.
            Having cash in the bank earning no more than 1% doesn't make sense when you are paying more than twice that much in interest on the loan.

            That said, I would not eat into your emergency fund to pay off the truck. That's not what your EF is for.

            You don't have to do all or nothing. You can pay off a big chunk of the loan and still maintain your EF. Or you could just accelerate your payments. Instead of sending in $291/month, send in $350 or $400 or $500.
            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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              #7
              tomhole I would stick with the higher paying job unless you really, really hate it.

              I had a job that didn't even feel like working, however I now have a job that feels like work sometimes but I still enjoy it....and it pays double what my old job did.

              With the income increase (going on 4 years now) I have not adjusted my budget at all except to be putting $1500-2000 extra towards my mortgage each month and paying that off asap (about 5-7 years left).
              Gunga galunga...gunga -- gunga galunga.

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                #8
                Originally posted by greenskeeper View Post
                tomhole I would stick with the higher paying job unless you really, really hate it.
                Very sage advice, and I am heeding it. I do enjoy my job and work very hard doing it. And I do have something I need to accomplish before I am done: being president of a company. I am on track to make that happen. The plan is stay at this income level (or higher) until age 55 (6 more years) and save, save, save. Then I have many options, one of which includes retiring. Never thought I would even have a shot at retiring at age 55 until I checked in here and found religion. That just made me smile typing it. Good to have options.

                Tom

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                  #9
                  When we paid off our car (we had 2 others that were paid for), our stress level went way down. For us, paying it off in one shot ahead of schedule felt better than paying every month and feeling like the finish line was so far away.

                  Think about stress and how it affects people differently. For some, it results in physical health problems. For others, it affects productivity. Still others it takes an emotional toll or impacts relationships. My advice is to do whatever provides the least amount of stress, immediate and future, but allows you to stay financially responsible.

                  You've heard accounts of people finding relief paying off single debts. Imagine how good it will feel paying off all debt. That is our vision!

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