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It Has Entered My Mind

January 28th, 2013 at 06:49 pm

This thought has entered my mind several times in the last two weeks: We have enough money in cash that we could pay off the truck today. It would still leave us with plenty of cash for other emergencies, too.

I think the thought comes from impatience. I want to be done with the loan. I spend too much time making calculations as to how soon I can pay it off. I'm annoying myself!!

The pros: We own the truck free and clear. We pay no more interest on the loan. I don't have to make calculations and record the loan. We still have plenty of emergency fund money. We will have only mortgage debt.

The cons: We have to use emergency cash. We lose interest on the cash (although it's very little). I have to focus on paying ourselves back...which will require calculations, too. Smile

I suppose I would need to consider any risk to this payoff scenario. I did read on USAA's website, that with the fiscal cliff negotiations looming, there is a higher probability of a government shutdown. This could lead to a delay of pay for the amount of time it takes. It might be nice to have that truck loan cash on hand if that occurred.

I won't decide right away. Payday is later this week. I expect to send in close to $450 to the truck loan at that time. Once mid month rolls around I expect the loan to be under $3K in a very short time.

I'm off to do more calculating. What would you do if this option was open to you? Pay off with cash on hand, and repay to your savings? Or just keep working to pay it down and off fast?

ETA: Interest rate is 3.39%, balance is $3706.02, regular payment is $329.13, and we have about $900 extra a month to send to the loan.

11 Responses to “It Has Entered My Mind”

  1. MonkeyMama Says:
    1359400884

    I'd just pay it off. Big Grin I'd pay it off if the interest rate was 0% - just to be done with the hassle.

    The hedge with a paid-off vehicle is that you can always sell or downsize in a large emergency.

    My crystal ball tells me that you are not 100% comfortable with paying it off right now, but you probably will once the balance is $2k or $3k. Wink

  2. Bob B. Says:
    1359401469

    If it were me, in the situation you outlined, I'd pay off the loan. I'd want to be done with it if I could.

    Paying off now vs. as scheduled saves you about $65 in interest. But, I'm sure you already knew that. And, it sounds as if you'll be paying off faster than scheduled anyway.

  3. patientsaver.com Says:
    1359402415

    Well, the interest on the loan is probably higher than the interest you're earning in a savings type account, right?

    I'd pay it off. Sounds very similar to what I did today with my sewer loan. I paid it off, about $2900. I took it out of checking where my money is earning nothing just sitting there.

  4. twest Says:
    1359403061

    I have had the same thoughts about hubby's bike. That cash really does make you feel more secure. I think though if you have plenty emergency money after paying off the truck loan I would have to agree with others....just pay it off and be done with it.

  5. Beawealthywarrior Says:
    1359403507

    I would pay it off as well. Like others have said the interest you're paying on the loan is higher than your saving rate, so u would be giving yourself a "raise" right there. I would much rather do the calculations to pay myself back versus someone else(the loan). Speaking from experience, it's so awesome to only have your mortgage to pay Smile

  6. My English Castle Says:
    1359403660

    Yeah, me too. How nice to not to have to think about it. But I agree, it's hard to see that cash go.

  7. PNW Mom Says:
    1359406447

    I admire your dedication! It's a tough call, but if you have the cash on hand, it might make sense to just pay it off and be done with it. Knowing you, I am sure you can readily make up for it very soon! Smile

  8. SecretarySaving Says:
    1359409267

    I would NOT dip into my Emergency Fund. This is not considered an emergency. Have some patience. Slow and steady. The turtle always wins the race. You've been doing a great job.

  9. texasdisneygirl Says:
    1359410050

    I don't know what I would do, honestly! I can see both sides. Paying it off sooner would be awesome! But then there's the what if....what if you needed that money from your emergency fund next month? Sorry, I'm no help!

  10. FrugalTexan75 Says:
    1359425312

    Maybe a compromise? Pay the $900 plus whatever would bring it to half-gone in February. Then pay the remainder in March. That way your cash on hand isn't taking a huge hit all at once, and it gives you the opportunity to see what (if anything) happens with the government budget.

  11. creditcardfree Says:
    1359430434

    @FrugalTexan, I like how you think! I'll definitely consider that approach in the coming days.

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