I recently recieved $2500. I do not have a car, and I owe $1100 on my credit card. Should I:
1) Pay off my credit card and buy a cheap car
2) Buy a cheap car and invest the rest of the money, using the interest to pay off my credit card
3) Pay off my credit card, and invest the rest of the money, usting the interest to buy a cheap car
4) Invest all of it, and save the interest to pay off my card and buy a car
If you think that I should invest it, please also give me some ideas. Thank you SOOOOO much for all of your help!!
2006-08-28 10:35:26 · 14 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
1) Pay off my credit card and buy a cheap car
I would suggest #1
See how much your credit card % interest rates are. More than likely they are at least 10%-20%. You are not going to find an investment that will guarantee even a 10% return on your investment.
Say for example you don't pay off your credit card that has a 14% interest rate. Instead you put it in a CD (Certificate of Deposit) at 5% interest rate. That means that you are still losing 9% (14% - 5% = 9%) So by investing it you actually lose money until you pay off the credit cards.
For that reason I don't suggest number 2,3 or 4
If you want to invest I suggest finding something that you can put $50 a month into, like a mutual fund. It is amazing how $50 can add up. If you use automatic deposit you can put $50 a month with no minimum into some mutual funds. I use TRowePrice, but you could ask people for suggestions or do some Internet research.
Good Luck
2006-08-28 10:58:17 · answer #1 · answered by Ren 2 · 1⤊ 0⤋
I would recommend paying off the credit card first, as the interest on the cc would be far more than you are likely to get from any investment.
With the other $1400.....
Not much you can do to invest that amount that is going to bring a lot of interest or return. Even if you could realize 20% that would only bring you $280 a year, not enough to really pay off a car.
Buy the cheap car but make sure you have it inspected by a mechanic or other qualified person to insure that $1400 car doesnt cost you another $1000 in repairs
2006-08-28 10:43:40 · answer #2 · answered by mslider2 6 · 0⤊ 0⤋
Pay off the credit card immediately as it compunds interest just about hourly. You will never find an investment that will make more money that the interest costs on your credit card.
From there, I wouldn't buy the car unless you absolutely need it. If you already have a job and have gone this long without it then you would probably do better to wait to buy one as long as possible. A car is a horrible investment as it constantly decreases in value regardless of make model etc. Definitely try to but a low mileage (like less than 15K miles) used car as the value has gone away quickly but the car still has a lot of life left in it. If you want to get into the collector car business then start doing research now and you may start mkaing money in a few years.
I would need to know more about you to recommend an investment.
2006-08-28 10:45:38 · answer #3 · answered by Matt M 5 · 0⤊ 0⤋
If you've gotten along for awhile without a car, you can probably do it a bit longer, so I would pay off that credit card and save for a decent car. A cheap car will just end up costing you more in repairs. And interest rates are so low now it would take you forever to make enough to pay anything...you don't have enough to really "invest"; the best you can do is buy a 6 month CD or something.
2006-08-28 10:42:48 · answer #4 · answered by poppet 6 · 0⤊ 0⤋
1) Pay off your CC. You are probably being charged WAY more interest than you would make on ANY investment.
2) DON'T buy a car now unless you ABSOLUTELY NEED it, not just really want one. You will only have $1400 left over and any car for $1400 is going to cost you a lot more than $1400 in reapairs in the first 2 years you have it. You are better off investing it. Don't put it in a mutual fund, stocks in general are not doing well right now. Pick companies that almost always do well, oil companies, pharmaceutical companies, and/or Procter and Gamble. The economy would have to completely crash into severe depression before people stop driving their cars, taking their medicine, and using soap, toothpaste and shampoo. Anything past that you need more $$$ to invest in and it's high risk from there. Do this for now and try not to touch the money, be realistic and try to get (or keep if you already have one...) a good paying job and SPEND LESS THAN YOU MAKE!!! Good luck.
2006-08-28 10:46:58 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Pay off the credit card should be your priority, unless by some miracle you are not accruing extra interest on the debt. Use the remainder on a cheap car or at least a down payment on an inexpensive car, if you need a vehicle. Keep in mind that maintaining a bargain sometimes isn't such a great value.
2006-08-28 11:03:31 · answer #6 · answered by Freddie 3 · 0⤊ 0⤋
Pay off the cc and buy a junker car. Better yet -- take public transportation if it is available (I know--almost impossible except in some big cities)
The interest that you can collect on $2500 is not enough to pay off anything. The interest that you are paying on the cc is surely much higher than any investment is likely to pay. So if you pay off the card it is as if you earned the cc rate.
Good luck.
2006-08-28 10:46:02 · answer #7 · answered by veritas 5 · 0⤊ 0⤋
Pay off your credit card and save for a nice car
2006-08-28 10:38:42 · answer #8 · answered by Anonymous · 1⤊ 0⤋
I would pay off your credit card and then save for a car.
2006-08-28 10:47:38 · answer #9 · answered by gsi 5 · 0⤊ 0⤋
Pay off the credit card...buy a good used Toyota
2006-08-28 10:59:31 · answer #10 · answered by Anonymous · 0⤊ 0⤋