Is it dumb to pay off a no interest type loan early?

Search

Rx Wizard
Joined
Oct 25, 2005
Messages
11,731
Tokens
Been reading Dave Ramsey (Total Money Makeover) and he talks about slowly eliminating all debt. I have your debt that you can't help (Internet, Cell Phone, Gas, Electricity, Food, Etc...) and than really a pretty good size house payment and a $550 monthly truck payment.

The truck payment is on a no interest type loan and I owe around $13,000 still. Is it dumb to pay it off if I have the money to do it? I am sure the logical answer is to use the 13k and invest it and make another 1k or so off of it but would or have some on here just paid off a no interest loan before to "clear the books".
 

New member
Joined
May 7, 2006
Messages
4,821
Tokens
Before neteller went away, I would happily take debt up to 25% interest.

If you can't find a way to make money on a no interest loan, you are dumb.

At worst, put it in a 5% online interest checking account and let that pay off the loan..

BTW, Dave Ramsey is retarded, but so is 90% of the population, so his answers do work for most people. Remember 90+% of the population makes less than $40,000, lives week to week on their paycheck and has no idea how interest works.

Sean
 

Rx Senior
Joined
Dec 10, 2002
Messages
8,483
Tokens
Do not pay the loan off and invest the loot... Buy something safe like a mutual fund or put the loot in Citibank eSaving account (5%). 5% return better then 0%... Pay off the truck over time...
 

New member
Joined
May 7, 2006
Messages
4,821
Tokens
I should note though - one and only one reason to pay it off is it will increase your credit scores.

If you can turn $15k in no interest into $50k in no interest....

Sean
 

There's always next year, like in 75, 90-93, 99 &
Joined
Sep 20, 2004
Messages
15,270
Tokens
Mathmatically it is obviously better to invest. IMO the only reason not to invest would be if you have a hard time saving money without burning through it (ie spontaneous trips to Vegas).
 

Rx Wizard
Joined
Oct 25, 2005
Messages
11,731
Tokens
Here is the problem (not really a problem). The loan will be paid off in monthly installments over the next 2 years as that is the time left on the loan.

Even if I was to invest and get a 10% return I would make less than 3k. Now I guess that is more than nothing but almost wonder if it is worth it as I thinking about elimanting allof my debt. I do believe in good debt (like rental homes) but debt on things like a truck can be dumb is my point.
 

New member
Joined
May 7, 2006
Messages
4,821
Tokens
Your point is dumb and usually your points are not dumb.

Give me the money and I will happily take the time it takes to set up payments while making interest on interest free money...


Sean
 

New member
Joined
Sep 20, 2004
Messages
4,574
Tokens
Here is the problem (not really a problem). The loan will be paid off in monthly installments over the next 2 years as that is the time left on the loan.

Even if I was to invest and get a 10% return I would make less than 3k. Now I guess that is more than nothing but almost wonder if it is worth it as I thinking about elimanting allof my debt. I do believe in good debt (like rental homes) but debt on things like a truck can be dumb is my point.
Not necessarily. You need to consider the resource of equity for the down payment of the truck, and what the truck does, it could be an asset to a business that earns money, in that case debt would need to be viewed differently. If it is just a vehicle to fart around in, it may very well be dumb debt, but any time debt comes interest free is good.
 

Woah, woah, Daddy's wrong, Mommy's right.
Joined
Feb 25, 2006
Messages
7,977
Tokens
I second Sean, send me the money and I will earn and keep the interest on your interest free loan. You can do nothing with this money at all other than keep it in your run of the mill savings account and come out ahead by NOT paying off the debt. Don't look at it as $3000 earned, look at what that $3k will be in 20 years.

People have a misconception that debt is bad. That is entirely untrue. Too much debt and debt that is too expensive is bad. I still have my student loans and have been out of law school for 10 years, why? Not b/c I can't afford to pay the $40k+ off, but b/c it is at like 3 or 4 or 5% (I don't even know) and I can earn more by investing elsewhere. Same w/ my wife's car which is at 2.9%. I will take debt at those rates all day long b/c I can end up ahead in the long run.

The valid response to pay it off here is in Lander's post. If you are going to waste it on stupid shit, pay down your debt, otherwise, keep the debt.

You want to get more into real estate, use that $13k for that.

IMO, any time you can safely earn a higher interest rate than what you are paying, keep the debt. Everyone's definition of "safe" is different, so that is up to you to decide.
 

SSI

New member
Joined
Sep 21, 2004
Messages
14,040
Tokens
reduce debt, reduce risk....

Dave points this out, over and over...

The Borrower is always slave to the Lender..

people always forget to factor risk into the equation.......
 

New member
Joined
Sep 21, 2004
Messages
6,910
Tokens
Cannot believe a guy like Ice that prides himself in number crunching, is asking a question like this. DO NOT PAY OFF THE TRUCK!!!
 

New member
Joined
Sep 28, 2005
Messages
1,330
Tokens
I believe loans in general are a dumb idea. The only loan I have is my house, everything else is cash. If I can't pay for it with cash, I really don't need it.
 

New member
Joined
Sep 21, 2004
Messages
6,910
Tokens
I believe loans in general are a dumb idea. The only loan I have is my house, everything else is cash. If I can't pay for it with cash, I really don't need it.

I do things the same way, but nothing wrong with zero interest loans.
 

" Thanks for tip Bricktop "
Joined
Jun 28, 2005
Messages
11,367
Tokens
Ice - do not pay off this loan. Earn credit ratings while making your monthly payments. 24 months off making a payment on time > eliminating 13K of debt.
 

Rx Wizard
Joined
Oct 25, 2005
Messages
11,731
Tokens
I debated posting this as I knew what the "right" answer is. My point was more a question?

Just closed on a primary residence Wednesday and I have tried to put together a plan to do something financially and one of which is to reduce debt/risk.

I guess it is more of a mental thing and was wondering if others have done it.

The question that I should have asked since we supposedly have so many risk takers here is your home paid off? I have just finsished reading a book called "Untapped Riches" which talks about using your home loan money/equity in home to invest at a higher rate.

The thing is most here pay off there home loan when in reality they never should like the book states.
 

New member
Joined
May 7, 2006
Messages
4,821
Tokens
I would never pay off a home unless I had kids. Once I have kids, kids don't do as well on the street as I could, so then and only then, would I either pay off a home or ensure if I used its equity that it was for bonds or CDs or something low risk.

Right now, give me as much money as you want at 10%. Give me neteller and that goes to 25 or 30%.

Sean
 

New member
Joined
Sep 21, 2004
Messages
14,280
Tokens
You know the answer. If it's a mental thing, then set aside the the balance on the loan in a separate money market checking account and pay the monthly payment every month automatically from that account. Treat the account like it's not yours and don't touch it or even look at it. By the time the car is paid off from that account you'll have 1K or whatever left in that account. No brainer. A no interest loan is not dumb.
 

New member
Joined
Jan 31, 2007
Messages
2,278
Tokens
Here is the problem (not really a problem). The loan will be paid off in monthly installments over the next 2 years as that is the time left on the loan.

Even if I was to invest and get a 10% return I would make less than 3k. Now I guess that is more than nothing but almost wonder if it is worth it as I thinking about elimanting allof my debt. I do believe in good debt (like rental homes) but debt on things like a truck can be dumb is my point.
I told you that a few times. A new truck for work purpose's is a waste of money. Keep the truck for work only as long as you can.:youmad:
 

Active member
Joined
Jun 20, 2000
Messages
71,780
Tokens
any loan I every have gotten I paid it off as early and as quick as I can why stay in debt no matter what the interest rate
 

Forum statistics

Threads
1,106,907
Messages
13,439,498
Members
99,345
Latest member
08winlink
The RX is the sports betting industry's leading information portal for bonuses, picks, and sportsbook reviews. Find the best deals offered by a sportsbook in your state and browse our free picks section.FacebookTwitterInstagramContact Usforum@therx.com