10K to "spend"

[Hot dog]

I just did this very thing. I have a 2nd mortgage at about 20,000 and I hate it, but I just chose to pay off my car and will put that money now towards the mortgage. I actually just got a 0% credit card and put the money to pay off the card in the MM so I will make 5% on it for about 15 months until I have to pay the balance in full. So, I did chose to pay the car off first and my rate was only 3.9%. Good luck with your decision.

[disneysteve]

I have a 2nd mortgage at about 20,000 and I hate it

I'm in that same situation. We've got a HEL at about 17K. I've sent a few extra principal payments in but haven't made a real effort to pay it off early. I think once our Roths are fully funded for 2007 (another month or so), I'll direct more money toward the HEL. I'd like to get rid of it in a couple of years. I've got more than enough in savings to get rid of it anytime but I hate to sacrifice the higher earnings of the investments, but at the same time, I hate having the debt.

[cptacek]

you are right, disneysteve, about the car insurance thing. Sorry about that. The link in another forum explained it very well. thank you.

[disneysteve]

you are right, disneysteve, about the car insurance thing. Sorry about that. The link in another forum explained it very well. thank you.

No problem. When to drop collision coverage is a common question.

Here's the link again for anyone who didn't read the other thread:
Property & Casualty Insurance: auto insurance

[cschin4]

Do NOT pay off the car. I see no point to that at all. The interest saved will be minimal. And, once people pay off their cars, those new car models start looking darn good. Keeping the payment will propel you to keep the car you have longer.

So, I would vote on either paying the HELOC with a committment on your part not to ever take out another Heloc. Or, pay $5K on the Heloc and put $5 K into the college plan and work as hard as you can to get that Heloc paid off and done.

[robex]

My vote is for paying off the car. Use the money you've been paying on that loan and add it to the HELOC.

...or, better yet, sell the new car, buy something second hand (with cash) and alleviate the car loan that way. Then, you'll still have $10k to apply to the HELOC.

[cschin4]

Everybody says "sell the car". Who actually does that in reality?

[collegeguy]

well, i guess i see what you're saying as far as once you pay off the car then you might itch to get a new one. personally, in the last 6 years, i've only had 1 year of a car payment and that's with this new car (now 1.5 yrs old), and if i pay it off, i'm going to have it for the next 7-9 years. its a honda pilot and not to get into a discussion about cars, but for my $ a honda is about as good a car out there and fits the bill.

that said, i'm like disneysteve...i hate having debt.

i understand about compounding interest and all that, but i think paying off the car or throwing it all at the heloc either helps my cashflow situation now by eliminating the car payment, or gets rid of the heloc in about 2.5 yrs vs. 4 or 4.5. and if that's my primary goal, which i think it is, then its one of those two. a main reason why i say that (again, I do realize the value and importance of compounding interest) is because i feel pretty good about my current nest egg, and maxing out my 401K and a Roth for both myself and my wife each year. So, trying to balance the two - investing enough for the future and having a comfortable cashflow for today. Certainly not easy to do, but trying.

[disneysteve]

Everybody says "sell the car". Who actually does that in reality?

Almost nobody. I agree that it is pointless advice.

[robex]

I guess it depends how much you 'hate' having debt.

Dh and I don't do debt and the only thing we've not paid for completely in cash is our mortgage. We each work part time and spend the rest of the time with eachother and our 3 kids.

All a matter of priorities and opinion, I guess.

[Scanner]

I don't want to argue too much with the regulars here in front of a guy we are supposed to be giving advice but what about my contention that he's not going to be able to invest once the second baby gets here? (or at the very least it's going to be very difficult with the loss of the wife's income)

What happened to paying yourself first?

Is it just because he wants the cash flow improvement everyone is steering clear of investing it?

[disneysteve]

I don't want to argue too much with the regulars here in front of a guy we are supposed to be giving advice but what about my contention that he's not going to be able to invest once the second baby gets here? (or at the very least it's going to be very difficult with the loss of the wife's income)

What happened to paying yourself first?

Is it just because he wants the cash flow improvement everyone is steering clear of investing it?

No argument here. I think investing is a great idea and I don't doubt that he can outperform the 5.5% car loan rate, but he did mention cashflow being an issue. That's why I voted for using the 10K for debt repayment.

[collegeguy]

yeah, cashflow is an issue. thing is i already contribute 15% to my 401K and my wife and I plan to continute contributing the max to our Roths. So, I think I'm already doing the right things in that respect. I agree that I can probably outperform the car loan rate, but its a cashflow thing and will allow me greater flexibility.