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Debt

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Mithrandir

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I just paid off my car loan, 3 years early. Check hasn't cleared yet, but I'm hoping there won't be any problems there. Capital One's "payoff quote" is good for 10 days, but they said the check would take 20 days to clear for some dumb reason (out of state), I'm hoping that doesn't cause a problem.

Honestly I'm not sure why I even had to send in a check, since they have no problem electronically debiting my checking account every month for my payments. I guess it's their subtle way of discouraging people from paying off loans early. I even had to call them for the address to send it to, they won't give that information out online.


In retrospect, a 5-year auto loan was a bit overkill, but I'm still glad I got it, because there were a few times in 2005 that I was really strapped for cash and wouldn't have been able to make the monthly payment if I had gotten a shorter-term loan.


I'm deciding whether or not I should pay off my school loan now. It's a low interest rate, but I can afford to pay it off now, and I kind of like the idea of being able to say "Hey, I'm debt free!".


One of my near-term goals (less than 2 years) is to buy a house. Before I paid off my car, I had enough to put down about 25% of a mortgage, but the prospect of making two major payments per month (house+car) wasn't a good idea in my mind. My goal before going into home ownership is to be debt-free though.


Got my credit report done, first time in 2 years. Credit rating went up 170 points, but it's still got room to grow. The only disappointing part is that even with my new and improved(TM) credit rating, it looks like the interest rates for car/home loans are still going to be higher than what I would have gotten 2 years ago.


Since the subprime market is currently in the process of imploding, interest rates are rising as the banks try to compensate for the fact that no one is buying all of those homes they foreclosed on. It's pretty annoying.


I briefly played with the thought of avoiding a mortgage altogether and simply saving up enough to buy a whole house, but at this point, this seems a bit unrealistic. It would take me at least 5 years (okay, if I get my raise next month for the promotion I just got, I can cut it down to 3.5 years, but hey, let's not count on money that I don't have yet, mmmkay?). Of course, this is all assuming nothing unforeseen happens.


I would have to start investing if I were to do that... and I'm not sure that's my boat. I hate risk. Everything I do is calculated and as riskless as I can manage. I mean, I took out a 5-year car loan when I could have payed it off in 2 years, just in case something bad happened.


I guess I could find a low risk investment somewhere, but at that point, why not just get a mortgage? The inflation rate will assure that the value of the mortgage will steadily go down over time, and I doubt a low-risk investment will provide enough of a payoff to be that much more beneficial over a mortgage.


I guess I've got time to figure out my plan though.
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Hey, good job! I managed to be debt free before buying (mortgaging) my home.

Far too many these days it seems to be wholly unable to manage their own finances. Take your time and find the house you want. It's only the most important investment of your life...

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One small tip - you have been losing X amount of money on a car loan every month and probably haven't missed it too much. Setup a savings account or instant transfer to an existing savings account for the same amount as the car loan on the 1st of every month. That way it's as if you are still paying the car loan, but instead you are saving the money. You've lived without it for a couple of years so why not continue it and grow a little nest egg for a house?

I did that with my student loans and you really don't miss the extra cash because I got used to it being taken out every month anyway.

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If you're risk-averse, look into an internet savings account. The rate's not mutual-fund-good but it takes five minutes to set one up and it's a guaranteed gain of about 5% and is a damn sight better than your local bank will give you (2% if you're lucky).

The Fatwallet.com financial forum always shows the current "free $50 for opening an account" deal out there.

Myself, I have an EmigrantDirect account and I couldn't be happier with it. It hovers around 5% and it's linked to my checking account so I can easily move money back and forth. And it's FDIC insured so there's zero risk.

Congrats on paying off the car. We're currently getting outta debt so we can hopefully pay off the hobbit hole before the economy goes to hell.

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