Should i pay up my car loan in full?

[Typoerror]

took loan of $50k for 5 years when i bought my car early this year. thinking of paying up in full since i have cash sitting in the bank. dont intend to invest as donno when the market will recover. is paying off car loan a smart move?

[Kelpie]

Why not? if you have the money .

 

Regards,

[Nutty]

Now that we are into recession, you also have to leave aside some cash just in case.

 

Another point to consider.

[Tigershark1976]

check with the bank what is the amount u have to pay if u wanna clear ur loan. den calculate the diff. if the diff is less than the bank fixed deposit interest, den dun bother to do anything. time is bad and cash is king...

Edited October 17, 2008 by Tigershark1976

[Typoerror]

assuming still hav spare cash for emergency after loan repayment.

 

will be checking with bank tmr. my loan is at around 2.9%. likely to go ahead if after minus penalty still can save >2%pa. better than fixed deposit. and the savings is also "bao jiat" one.

Edited October 17, 2008 by Typoerror

[Windwaver]

Yup, if you can save more than in fact any bank interest, why not? Who knows even bonds might fail someday

[Horsee]

Cash out & work towards debt free, if u intend to keep & drive the car for >5years.

Else just leave it ..

[Andyngps]

If i were you, i would invest part of the money. Actually now is the best time to invest. You go to woait for another 12 years before stocks will hit such low again. And besides, car interest at 2.5%, it's not really a lot.

[Typoerror]

just got reply from bank. need to top up $46k for full repayment. add this to the $9.6k i already paid thru 10 months of installment, total interest would be $5.6k. this is not much less than the total interest payable of $7.5 if i continue with the loan. so i think it is not worth to pay up in full.

[Emils]

Don't forget that the impact of inflation on the real value of the money too. Hence, if you drag out the loan period, you will actually be paying less in terms of the real value of the money.

 

Sorry if I sound somewhat confusing. I believe there's actually a formula to convert a future quantum of money into today's value after taking into account inflation. That may be a more systematic and clearer way of explaining what I'm trying to articular using words...

[Modykoh]

if u have the extra liquidlity cash...after paying the loans,,y not?

 

if your investment risk appetite is high...the extra cash come in good during/after the dust settle..u may pick up few good counter to invest...

[Chrispie]

Keep the cash. Wait till nx year market falls further, then buy some sound stocks (e.g. SGX, DBS etc) and keep. In 5 years time when ur loan is paid full, your stocks should give you quite substantial returns.

 

50k loan is not a big amount, at times like this, cash is king. And since interest savings is really not that big at 2.9%, you rather keep yourself liquid and grab some good deal.

 

Paying off ur loan now is actually opportunity costs to what you can do with the money.

[Ixat]

Most importantly will you itchy backside go change car because now theres no loan, installment etc?

 

I know i will if i am a fully paid up situation

[Cybertron]

hmm...assume loan interest is 2.5%, 5 years loan is probably around 12.5%. If over the 5 years, ya 50k cash is invested and can give u a yield of > 2.5% per annum average, then does not make sense to fully pay?

 

fully pay basically reduce ya option now in case if ya need the money.

 

at such times, I think so liquidity is probably best.

 

of cos, if ya feel if ya got 50k at hand, and might just end up splurge on sometimes else that has no investment value, then by all means, better settle the loan to reduce ya debt.

 

i'm no financial expert, this is what i feel i would do if i were in ya position

[Typoerror]

actually a significant portion of my $ is already in the stock market. i may invest more but not now as i think the market has not bottom out. so i guess i will keep it as cash for now.

[Typoerror]

with cash on hand, i tend to want to mod car

 

with no outstanding loan left, i tend to want to change car

 

haha.

[Zenvey]

check with the bank what is the amount u have to pay if u wanna clear ur loan. den calculate the diff. if the diff is less than the bank fixed deposit interest, den dun bother to do anything. time is bad and cash is king...

 

correct me if i'm wrong but the interest rate on the car loan is not the actual interest rate you are paying.

 

the effective interest rate is much higher due to the nature of the car loan (flat rate)

 

hence a 2.5% loan could in fact be around 4.5% of effective interest

 

so unless your fix deposit pays >5% , pay off your loan

[Chrispie]

If STI hits 1500, its time to go for some bargain.