On the topic of finance, I owe $5900 on my car which was purchased brand new in 2014, it’s at 0% interest. I don’t have a house right now and live at my parents, if I continues to make my payments I have another 1 year and 9 months left. I have about 65k saved up, should I just pay that off or continue to make the payments? I plan on buying a house in 2-3 years.
I like the freedom of having that car completely paid off, I also kinda think why get rid of $6000 if you can keep making payments of $270 a month for another year and 9 months.
If the car loan is 0% interest and you could save money at a higher interest rate, which you should be able to do, then it seems like an easy decision to keep making the payments.
I know it's moot since you are already making payments but most 0% interest rates have some type of administrative or processing fee that should be considered when deciding if or where to finance. These fees could cost more than obtaining a loan with interest . Given it's over a six year period the fee, if there was one, may work out to a small percentage . I expect you are fully aware however if one person learns from the post then it was worthwhile. Furniture stores with no payments for X months or short term financing may be some if the worst culprits .
Pretty sure if it’s a zero percent loan you already paid an origination fee up front.
For example I had to explain to my wife that a $10k loan at 0% where she paid $400 up front to get the $10k really isn’t a 0% loan. But it’s not a 400/10000 = 4% rate either because there’s no compounding and there’s no traditional benefit of interest savings by paying it off early.
As you replied above, you’re in a good situation regardless so it’s really personal preference what you do. Since you intend to buy a house sooner than later, You may want to ask a mortgage company or two whether your credit rating would be helped or hurt by paying off the car early.
It’s been a while since I checked housing and I don’t know USA vs Canada differences, but it used to be you could get a mortgage loan totaling ~2.5x your annual income. That is not to say it’s a good financial decision to do so, you’ll need to consider a whole host of market and personal factors.
Regardless of the above, there is never a downside to paying off debt.
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