Pay it off?

Pay off now, put 50k in a CD, keep some in low interest savings. Up your IRA/ 401k contribution to the max allowable. Credit score might drop in the short term, but in the long term it won't matter a bit.

 

I brought my 3.06 from my credit union to the dealership and they offered me 2.9. That was about a year ago. I was over 800. Something isn't adding up.

 

You don't know the OP's situation. Maybe he has half a million in various stocks, mutual funds and syndicate mortgages...

 

Both Capital One 360 and AmEx have high yield accounts currently showing 1.7%. They were up around 2.00% earlier this year as long as your balance was in excess of $10,000. The only difference between those accounts and your average bank account is that it typically will take 3-5 days to access your money and you can only make a finite amount of withdrawals each month. That being said, it's effectively a savings account and the rate is typically some of the best you'll find short of tying up your money into a CD or in an account with risk (IRA).

I've got a few CDs since the rates were somewhat higher than the high yield savings, but it was a decent compromise for someone who's somewhat risk adverse.

 

That doesn't matter. You still put the money where it will earn the most.

 

All about the timing, I suppose. Back to your original question. If you have the money to pay it off, you should pay off that loan. This is assuming you are not generating more than 4.XX% on your savings that will be used to pay off the truck, and can continue to maintain an adequate emergency fund, etc. Letting money sit in a savings account long term is never a financially sound idea, as it is losing value every day.

 

If you don’t need the money as a safety net pay it off. I owe about 28k on mine and could pay it off and still have a decent cushion but with a new baby not really comfortable with that at the moment. So I just throw $50-$100 extra a week at the loan for now. All what your comfortable with in my opinion! I’ll probably pay it down in bigger chunks over time once the baby gets settled in, its a lot easier to throw away a couple thousand here and there compared to pulling out 28k and kissing it goodbye.

 

Everyone has different financial situations and $50k might be sufficient (and not excessive) for his safety net. I agree that this should go towards the loans, but like a member previously said there are savings accounts that are equally as good as CDs. If the funds are in a CD they are locked up and not available until it matures, so it defeats the purpose of the money for the OP

 

I don’t believe this is true at all. I believe it has more to do with your income/debt ratio. Maybe when you’re young and trying to establish some credit that may be true. My experience has been get rid of as much debt as possible; It’s ALWAYS worked for me, my score is 850. It should be called your “stupid score” anyhow, I’ve paid more than what it was really worth and couldn’t afford it anyway because I had to finance it.........except for my house.

 

how this works exactly isn't clear on this side because the details are different in every case. that exactly worked for me, though.

i rebuilt totally trashed credit with high debt on low income for many years by following my own guidelines above, because that was all i had to work with. zero debt and 800+ now.

 

Maybe i've been on this earth too long, but when people get giddy about 1.7-2.0% savings rates I lol

 

50k in savings is nothing here in CA. You can’t even think about buying a house without 200k cash for a down payment.

 

and I'm still trying to unlearn the values taught in my gen. we were taught so much BS.

 

Plus this CD talk for 2% is crazy, my Credit Union savings account makes 1.75% and it doesn’t tie up my cash.

 

Rate seems a tad high but it's based on a number of factors and in the end, 4.5% still isn't too bad.

If you have credit card debt, pay that off right now because 20%ish is ridiculous.

CD's are silly IMO because currently, rates are extremely low and will go up. When rates go up, the price of your fixed income goes down. People always say buy CD's and bonds if you want to be conservative but fixed income is gauranteed to go down in a rising rate environment and since the rates have been going down since the 1980's, many people have no idea what happens in rising rate environments. If you find it necessary to be in "safe" assets, I would rather be in a fully liquid money market yielding 1-2% over a CD or any other fixed income investment right now. When rates go up, you will wish you had waited. I personally think we have another 2+ years before fixed income even starts to becomes attractive again. I like US dividend paying stocks best but there is obviously going to be risk there. I look at equity investments as a 3-5 year average time horizon so it's silly to worry about it month to month or even year to year unless you are retired and in the distribution phase rather than the accumulation phase. I also never keep my "savings" in cash because it doesn't yield anything for the most part. If I need emergency money, I can sell my stocks and have the money in 2 days.

My rule of thumb is what is your average rate of return on investments vs debt? If the investments are higher, than keep the debt.

 

Isn't that the truth. I remember the elderly living off the interest in their savings accounts because of the rate of return. [7% or so]

Now........because the government HAS to artificially keep rates low due to the national debt and what would happen if they returned to true and honest historical levels, [quit borrowing for the natl debt and cut handouts to pretty much all the leeches here and abroad] savings interest rates are non existent. People actually are punished for not spending their paycheck and more weekly and putting into savings. Savings is where banks USED to go to for their money to loan out to those who wanted to borrow, now, peanuts from savings and they get it elsewhere or float the loan, then sell it to someplace else.

Too cheap of borrowed money [interest] increases inflation and devalues savings, and makes saving money undesirable for the masses.

 

Just pay off $6k. and you'll be left with tiny little payments.

 

It doesn't work that way though unless you refi. You just reduce the term of the loan not the payment.

 

Usually extra payments only shortens the term not decrease the payment.