Should I pay my vehicle off?

Question

I have 3 years of payments left on my truck, the interest is 3.9% with low monthly payments. I can easily afford to pay it off, but is it really worth it? What are the negative aspects of paying it off this early? This will not affect my credit because the vehicle is not under my name.

Answer 1

If you have the money, pay it off. This will be a huge relief to the party who took the loan out. (They will likely help you out again if you need it). Also, you will save 3.9% interest. DO READ THE LOAN AGREEMENT MAKE SURE THERE IS NO PRE PAY OFF PENALTIES - can you believe it....sometimes there is a charge for paying it off early because they want the interest!......

Answer 2

Firstly, let me tell you where I'm coming from in this answer: I have had a credit problem many years ago, have had multiple cars all completely paid off (not at the same time), am on my second home purchase, and am in the same boat with a car payment on a low-rate loan. I have been through this and have an intricate understanding of how credit and the (criminal) credit reporting agencies work.

My advice first and foremost is to go to Kelly Blue Book and get the Private Party and Trade-in value of your vehicle. You should insure that the amount owed on your vehicle is less than the average of these two numbers. If you decide to trade that car in before the loan is fully paid, you ought to be able to get approximately this amount for your car. It is important as a primary priority that you owe LESS than your vehicle is worth. Once you get under that number, you probably will stay under it.

Next, if you have a history of difficulty in managing financial matters, you would be best to pay it off completely. Otherwise, I wouldn't. Instead, you can take and invest the remaining money in mutual funds that will (likely)earn better than that. I would recommend USAA as a starting point for mutual fund research. They have a top-rated fund - Precious Metals and Minerals - that returned over 40% in the last year and more than 10% since inception more than 10 years ago.

If you don't own your home, a very good course of action may be to take what you have and use it as a downpayment on a home, which will increase in value over time. This eliminates any rent payment in lieu of a home payment, which while somewhat larger, it is investing rather than going to someone else instead.

I didn't mention this earlier, but just to verify, you don't have outstanding credit card debt, do you? If you do, you would be way better off to pay this down or completely off first as these cards will usually have tremendous interest rates. Watch out for the fine print on these too; just because a card says it had a 1% introductory rate doesn't mean that interest isn't accruing otherwise if you don't pay them off within the first 3 or 6 months or something.

BOTTOM LINE: Evaluate your total debt picture. Investing at a rate higher than 3.9% would be more beneficial than paying off the 3.9% loan. BTW: Automatic payments for the car loan would be a good idea too, so you can't "forget" a payment.

Best of luck in the future!!!

Answer 3

I say keep your cash your cash. You'll never get out of it what you payed for the car-it's depreciating faster than a boulder rolling down a hill. It doesn't matter what kind of car it is either. Of,course some depreciate a little more or less. Still, they all depreciate quickly.
In 3 years you may elect to get another car and trade it in for another. At that time you can either put it in the paper or have the dealer pay off the balance or transfer it to another loan if you owe more than what it's worth. (try not to do that). Since the interest rate is low, most of the payment is going to the principle. I would probably advise differently if you had a 29.9% interest rate.
You have an interest rate that is hard to get currently and if it's affordable and you like your car then take advantage of those benefits until you pay it off. If you are not on the loan and you are paying the payments (sounds like on time) then it will better the credit of the person who is on the loan. It will not hurt your score (or the other person's credit score if you pay it early). If that person needs better credit, having this account for some time with the credit bureaus will help to establish or rebuild the credit. It takes time to rebuild credit. If the person on the loan already had great credit, it won't help but ofcourse, won't hurt. Excellent credit is a score that is above 700. If you are considering buying a home , land or another major purchase and you already have many debts (or your friend because that person is on the loan) you may want to pay the car off so that it shows less debt on your credit bureau so it is easier to qualify for what you want to purchase. If this is the situation your Mortgage person ,Lessor, Creditor, will advice you that will have to pay off the loan to get the loan because you have a high debt to income ratio.

I say again, keep your cash, your cash , you may need it for something else, maybe an emergency (hope not, but never know) or invest it in something that will generate you a return on your cash!

Hope this helps. Good Luck, friend.

Answer 4

If it's not in your name - the ONLY negative effect would be losing that amount of cash in one payment. On the other hand, the positives would be - no monthly payment and you wouldn't forget the monthly payment. Besides, a big plus is the interest you'll save over the next three years! If you have the money, pay it off!

Answer 5

3.9 is a really great rate if you had something else you wanted to invest your money into like realastate. Paying it off would save you the 3.9% for 3 years. And paying off a loan early increases your credit score not decreases. You can also make extra payments towards the princaple which increases your score. If you pay it off most states you do not have to carry collision insurance if you dont want to. only liability. You now have all my knowledge. now you have to make your own decision.

Answer 6

in case you've were given it, i might want to bypass ahead and pay it until eventually you worry dropping your job or some significant price arising. Pay it off, and also you received't have a vehicle charge anymore. And, you'd be finished paying interest. besides the undeniable fact that, somewhat of paying on your vehicle personal loan, positioned precisely what you'll have paid on your vehicle into your mark downs. you're used to paying it now, so that you received't even omit it.

Answer 7

even if you have a low interest rate an low monthly payments, its best to just pay it off to save yourself the interest. Since it wont change ur credit score then that part doesnt even matter. Sometimes there are charges for paying a loan off early...check to see if you have any charges and compare that to the amount of money you will save in interest if you pay it off today...If the math works well for you then I say do it.

Answer 8

That's a tough one. Actually, it's not a bad thing to pay it off early, that means less interest that you'd have to pay, even if it's 3.9% The only downside is that it not being on your credit to have that reported.

Answer 9

Open a savings account with ING with the money you have to pay off the truck. They pay 4.5% interest on your money.

Since your loan is at 3.9%, it will be like you are getting paid .6% to buy a car.

Email me, and I can send you a link that will get you $25 when you open the account...(a great refer-a-friend program).

Answer 10

I think if you have the money you should pay it off. It is a low rate, but it's one less debt to worry about. I can think of the only down side being if you have an emergency and will need the larger sum of money. I'd pay it off if I could.