#CarDebt #FinancialPlanning #InvestSmart
Hey everyone! I’ve been staring at my car debt and wondering: Is it really worth it to pay it off? I’m sitting on about $17K with a hefty 10% APR, and my monthly payments are around $400. I’ve also got some cash in the stock market that I’m reluctant to pull out. So, what’s the best strategy here? 🤔
A few people have chimed in, suggesting I focus on paying off this car debt. After some thought, I’ve even mapped out a plan to settle everything up by mid-April 2025 when I get my bonus. 🚀 But here are some pain points that keep coming up, and I’d love to hear how others handle this!
Pain Points:
- High Interest Rates: A 10% APR is no joke! It means I’m paying a lot more over time if I drag this out until 2028. 😱
- Opportunity Cost: By keeping my money in the stock market, I could be missing out on making more significant gains. But pulling that money out might mean losing potential growth. It’s a bit of a tug-of-war.
- Future Financial Goals: If I focus on clearing this debt, will that free me up to work on other financial goals down the road—like saving for a home or retirement?
Possible Solutions:
- Paying More Each Month: If I can squeeze out an extra $100 or so towards the debt, I could tackle it faster and ultimately pay less in interest.
- Refinancing Options: Have any of you ever considered refinancing? It may help lower that pesky interest rate!
- Utilize Funds Wisely: Should I withdraw from the stock market just for this debt, or let it ride?
The big question remains: What’s the best approach for tackling car debt while still keeping a foot in investments? 💡
I’d love to hear YOUR experiences or any tips you’ve implemented. How did you decide whether to pay off debt or invest? Let’s chat! 💬
10% is criminal, if this is your only debt 100% pay this asap.
10% is rough, I’d say yes.
Its a guarantee 10% return and 100% safe
At 10% APR, I would be considering paying this off quicker than 2028 UNLESS I have other financial goals that I consider more pressing. For example, do you have an emergency fund? Do you have higher interest debts like credit card debt? Are you planning for RRSP/TFSA contributions as part of your retirement planning?
Pay it off
The opportunity cost of investing in the index fund is unlikely to average 10% in the next 4 years. I’d say pay the damn loan, provided that you have no credit card debt
Debt snowball. Smallest debt first. So student loan then car loan. Then back to the stock market
Yes, it is unlikely your investments will garner you more than 10%
Ouch where did you get 10% APR? Yes it’s worth paying this off as quickly as possible.
How exceptionally well are your stocks performing? Probably not well enough.
Stock market gains are taxed. They’re also not guaranteed.
Interest savings are not taxed and are 100% guaranteed.
My general rule is any debt above 6-7% gets paid off before investments are made..
I’d happily take a guaranteed 6-7% with no risk, and that’s effectively what paying the debt is.
Even more so if you are not investing through a tax free account.
10% is an absolute yes. Sell everything you need to pay that off.
Pay off the 17k at 10 points and 4 k at 8 percent would be my answer.
Or if you want a balance approach pay off one of these two debts and let the rest ride in the market
Or if you’re in div paying stocks withdraw the divs and use to that to pay the cc stock.
A portion of you’re inv need to service these debts. If the points were lower I wouldn’t be as concerned.
Once you are debt free, you can then contribute that $400 to your TFSA
Yes at 10%. Something to consider is “opportunity loss”, the quicker the debt is off your balance sheet the “more” opportunity you have with this free capital for more interest bearing/ capital appreciating assets
Man thats bad pay it off!!
And for your TFSA question its a tax free savings account you can have people use it for their retirement long term investments.
Yes, pay it off. with that high of interest, you won’t have any investments worth dumping money into that will make you more. Not to mention you are paying $400 a month. Clear up the car payment and you can just transfer that $400 a month into an account afterwards, with no interest coming out of it.
Do you have other debts, an emergency fund, or retirement savings?
Depends what kind of loan it is.
If you save the interest by paying it early, yes, that’s likely a far better return than you’ll get on the investments.
If the interest for the whole course of the loan was rolled into the original payment, and you’re just paying it off over time, then no, you’ve already paid it, and can only reduce it by taking as long to do so as possible.
If you prefer a more secure feeling of having less debt, paying it off sooner might be worth it.
Is your money in the market making over 10%?