Need help with small windfall

[Scanner]

Okay, fair enough, I'll take your word that the interest rate on a $4000-5000 loan was high enough for a used car vs. $18,000 for a new car (you are stating you had no cash for either purchase).

It's just that remember this - the car dealership always wins. Yeah, people tell me what a swell deal they got, yadda, yadda and they always say the same line:

"Gee you are such a good negotiator you should come work here."

(now I know I was screwed when they say that to me, LOL)

But if you got 4.9% on the car, you can betcha your bottom dollar, they tacked an extra $1000 on the cost to make up for your poor financial circumstances (high debt) and credit.

Good luck to you - despite the exchange here, you seem to be making decisions on the merit of the arguement, true to ESQ fashion.

[SavedintheCity]

It's just that remember this - the car dealership always wins. Yeah, people tell me what a swell deal they got, yadda, yadda and they always say the same line:

"Gee you are such a good negotiator you should come work here."

(now I know I was screwed when they say that to me, LOL)

But if you got 4.9% on the car, you can betcha your bottom dollar, they tacked an extra $1000 on the cost to make up for your poor financial circumstances (high debt) and credit.

Actually the used car prices were closer to 8-12K and I bought the VW for 15K. So it was much closer to a new car than what you are thinking. Also, we didn't need to put any money down on the VW, and the used car guys wanted something down. Again, we needed a car (public trans blah blah blah) so it was the optimal economic choice at the time, despite not being THE optimal economic choice one can make.

Shivers . . . never ever ever heard that from a car dealer, usually they are too pissed off at me to even talk to me by the end of the deal. We walked out 3-4 times on the purchase of the VW. The sales guy jumped in front of our car to stop us from leaving. We finally signed the loan docs @ 9 pm. on a Sunday night. NOBODY in the dealership smiled at us as we left. HA! You're right of course, the house ALWAYS wins. They were just a little less successful with us.

Thanks for all your help.

[sakigt]

Sorry, I just don't see it that way. My financial decisions are only based upon economics (don't flame about the car loan I know it was stupid). I could care less what my parents think of how I used the money. It is a gift, as a gift it is unconditional. Gifts cannot by definition contain any conditions. What would make them happy is if I am happy, and I will be happy if I am debt free as soon as possible. So optimizing this money's value toward that goal is all that interests me.

Thanks for your reply though.

Luckily your parents dont think the same way, or you wouldnt have any extra money

Pay off the student loans

[bjl584]

I would use the money for the student loans. That is why it was given to you. If you think that it would be better to use it for another purpose, then explain your situation to your parents. I'm sure that they will understand, and will not mind that you use the 10K to pay off some other loan. But at least talk to them about it. Gift or no gift, it's the right thing to do.

[Ima saver]

I agree, I think you should pay off the smaller student loan.

[SavedintheCity]

I would use the money for the student loans. That is why it was given to you. Gift or no gift, it's the right thing to do.

Sorry, but we come from different cultures. A gift is a gift, only gratitude is required from me, not an explanation on how I spent it. I appreciate your advice, but would appreciate something more substantive.

[cptacek]

My dilemma is this, do I use the money (along with our tax return) to pay off the Car or the Student Loan?
...
Sorry, I just don't see it that way. My financial decisions are only based upon economics
...
Second, that was not my question. I know you should always pay down the high interest debt first.
...
Sorry, but we come from different cultures. A gift is a gift, only gratitude is required from me, not an explanation on how I spent it. I appreciate your advice, but would appreciate something more substantive.

So what you want to hear is "use the money to pay off the car." Ok, there you go. That is not what most of us consider ethical use of the money, but you shot that down. That is also not what is economically the best choice, because of the interest rates involved, but you shot that down too. So, use the money to pay off the car. I really don't even know why you asked the question if you aren't going to even consider listening to our advice.

[creditcardfree]

I can see why you posted the question. I think at first glance I would have been tempted to put the money towards the car and work to paying that off first because of the large payment. There is something psychological about it.

Because of the interest rate and the ability to have the student loan paid off now, my vote is to pay off the student loan. Based on my rough calculations you will actually pay the car off a couple of months sooner than if you did the reverse. So then you are on the road to those other student loans sooner as well.

You are very blessed to have parents who want to help. I can tell your spirit appreciates the gift.

[scfr]

I've not read this entire thread.

However, if your parents specifically stated that the gift was to pay off the student loan, then that is what it is to be used for! If they said it is a cash gift for you to use however you like, then that is another matter.

Did your grandparents or other relatives ever give your parents money to be saved for your education? If so, is that what they did with the money? Or did they go out and spend it however they wanted to (paying off their own credit card debt, or taking a cruise with your college funds, for example) rather than honoring the giver's instructions? I doubt it.

[bjl584]

Sorry, but we come from different cultures. A gift is a gift, only gratitude is required from me, not an explanation on how I spent it. I appreciate your advice, but would appreciate something more substantive.

More substantive? Can I ask why you even bothered to take the time to post this question? You already have your mind made up that it isn't wrong to use the money any way that you see fit, and you've disagreed with everyone elses' opinions and input on the subject, so what was the point? Take the money, and do what you wantever you want with it. End of story.

[Scanner]

I thought he agreed the student loan was the best choice. Economically, they are a longer term. He already got screwed at the dealership when he got the 4.9% interest rate. He paid more upfront for the car. That's the way it works.

A student loan is generally 10 years, maybe 25 years if he refinanced so in the long run, he'll end up paying more interest (time and interest rate).

Yeah. . .I think his spirit is actually one of gratitude - he's just a newbie in business now learning the difference between short term and long term debt.

Term baby, term - don't worry about interest rate and monthly payment.

Time is the most precious commodity negotiated.

[Homebody]

Sorry, but we come from different cultures. A gift is a gift, only gratitude is required from me, not an explanation on how I spent it. I appreciate your advice, but would appreciate something more substantive.

You said you were "supposed" to use the money to pay off the school loan. In what culture is it okay to ignore what your parents have asked of you? As a parent who has helped my children with school and buying homes, I would be pissed if they did something else with it other than what I asked.

Now if they said "here take this money and use it to make more with illegal activities" that would be one thing, but they said the money was to pay off student loans.

[areareare]

Hi
I think it depends on whether or not the student loan has been a big issue as to (how long it's been outstanding), a sore spot between you and your parents etc. If it's always been hanging over your head....get rid of it .

[autoxer]

Why not use the whole $10k windfall to put towards the most evil debt?

.... that killer 45K (ADJUSTABLE RATE) student loan currently at 8% yikes!

[SavedintheCity]

actually, I think I have reconsidered.

After working out the amortization schedules I have the following:

10,500 Student loan
7.35% annual interest
115.14 monthly minimum payment

12,454 car loan
4.9% annual interest
315.84 monthly minimum payment

These calculations assume that I use the money saved each month on the one debt to use to pay off the other.

If I pay off the student loan with the money I will be making payments of
430 per month for ~31 months to pay off the car.

If I pay off the car loan with the money I will be making payments of
430 per month for ~26 months to pay off the student loan.

Again, to all of you in the "it's what it's intended for vein" it is not a gift if I am told what to do with it. Thanks for your input, but it is not helpful. It's like giving you a painting and telling you where to hang it. It's a gift, I will do with it as I choose.