Invest or Pay off truck?

Thanks, I was taking the simple way out. Shoulda gone with excel in the first place.

 

Yea, gotta work off the compounded value. Feel free to download, I worked out the formula in OpenOffice.

 

I might, I figured out my problem. Instead of taking interest or anything into consideration I just multiplied my payments that I'm making (I pay slightly over) by the number of months left

 

i would pay for the truck… you are going to save $ on interest! then you should save a few bucks (not much, but some) for actually owning the truck and not being still finance(insurance wise), you credit score will also increase out of the deal….
what I would ask your folks is to let you pay at 24 months vs 18 so you could pay them about 180 per month instead of 250…. (you can always pay them more/in full if you get the lute!)

 

See this is what I'm thinking.. My credit score kinda hurts right now (still over 700) but my debt to income ratio does not look good. and I'd pay them off in 18. I'm not hurting to make my payments at all. They arent offering to pay for the truck because I can't its just a graduation gift that they are offering early. They would rather pay it off now than wait 18 months just to save on that interest

 

I only mention the 24 vs 18 cuz you can work those other debts down or keep more $ in ur pocket even if the 250 isnt difficult at all...

 

Job security is key here.

Carrying a high amount of leverage (read: debt) for a few years is no big deal if you will definitely be employed during that time (healthcare, North Dakota oil boom, etc.) If you know you will keep your job, I'd invest now at your young age because the money you earn on that investment will be WAY WAY more than the interest you save on the truck note.

If your employment is less secure, have your folks pay off the debt and then don't worry about losing your vehicle if you lose your job. Having transportation is vital to remaining employed and getting re-employed these days.

 

I hear you and the credit score is certainly something to think about. Depends on your risk aversion if you want to go the investment route.

 

either way...............stay thirsty my friend

 

Pay off the truck. Done. One thing you don't have to worry about. Take any money you want after that and do what you want with it. In wouldn't even hesitate for a moment to just pay off the truck.

Not to mention they're giving you more money in that circumstance.

 

Hahaha.... u know he gave his father "the talk".... and he's the life ofvthe party even when he's not there....lol




......sorry,......mi had to....

 

Pay off the truck.
Try an limit paying any more interest than you have to in life.
Possible investment interest is just that, possible, so go with the sure thing and pay off the truck.

 

Good points. I have 0 job security being that I'm in college. I have a job and I will for the next 18 months but as soon as I'm no longer a student that job ends.

$300 less actually lol

 

Invest in gold since the price will go up and you will make it back in not time when the market is right

 

sigh. there about 5 people on this thread that have a glimmer of economic sense. you have a really good loan and have no problem making the payments, so do NOT pay off in a lump sum.

take the 6500 and invest. do not buy individual stocks because chances are you will not pick the right ones or the right time. do not "trade" stocks...you INVEST.

look at no commission/low fee etf's. there are plenty of resources for you to use, i personally use www.fidelity.com. you can INVEST in couple of different etf's that will give you a return on your money (aka dividend) that will beat the 2% you would have saved by paying off your loan.

you have a terrific opportunity to start an investment portfolio while you are very young. if i could go back 20 years and invest $6500 of free money...sigh.

anyway you asked, there's my answer. YMMV but i think you are nuts to pay off the truck based on the information you shared.

 

Interest gets smaller as the principle goes down.
It's the reverse of compounded interest on a savings account.

On a savings account, example 10k at 2%, first month you get paid 2%/12*10,000=16.67
The next month, you get paid
2%/12*10,016.67=16.69
The next month, you get paid
2%/12*10,033.36=16.72
etc....

The loan payment goes the other way.

First payment, you're paying (APR/12)*balance
2nd payment is (APR/12)*(balance-principle reduction of 1st payment)

On a home loan, your first 10 years, your $1500 payment might only deduct $200 from the balance. Your last 5 years, that $1500 might only pay $200 interest.


BTW: Loan amount of 10,700 at 2% over 48 months works out to $442.62 interest paid.

http://calculator-loan.info/index.p...m=4&annual_interest_percent=2&show_progress=1


Now to answer the original question.....
2% is a damned good rate for a student. Look into your investment options and see if you can find something that will guarantee a minimum return of 2%.

Also something to keep in mind....
Parents pay off the truck, and you pay them off.
I'm assuming the $4200 that you will repay them is interest-free?
That's a BIG money saver. If you're paying $250/month on the truck now, you'll have your parents paid off in only 16 months... so if you keep the loan you're paying until 2017, if they pay the truck off, they are repaid for the balance before the end of 2014!

Adding in that last 40% of the loan being interest-free, it's a win-win to have them pay the truck off now.

 

Or he'll lose his ass.

 

+10,000

People spend 6-8 years in college learning proper investment, and they are often wrong.
Someone with no education opening up an e-trade account is only going to make money through lucky guesses.

 

+10,001

 

terrible advice. one option will be a guaranteed depreciation of value. one option over time has proven to appreciate in value. don't take financial advice from a truck forum. go talk to a financial adviser. you will lose if you try to 'play the market'. you will win if you learn what investing in the market means. your parents sound like they are giving you a very unique opportunity to learn one hell of a valuable lesson. don't pass it up. cars come and go.