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Posts: 386
Registered: ‎09-15-2012
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Re: Sudden mini-WINDFALL.. To pay off AUTO LOAN or CC debt?

What an interesting thread. I've thoroughly enjoyed reading it!


My original suggestion would have mirrored Revelate's: that 2% is an incredibly low rate for your auto loan and that your money would be better used on your student loans rather than attacking the low-interest car loan or 0% APR cards with a year left on the clock. However, then you explained your student loan situation - Sweet deal! Congrats! - so obviously that's not the way to go.


I think Gemini's suggestion of refi-ing as much of the credit card debt as possible into the car loan is excellent. I agree the only logical exception would be if you're for sure going to be able to pay the cards off at 0% APR before the term expires. However, even then, as others have also said 2% is so low that you really could expect a better return than that investing the money. Normally I'd advise someone to take the 'safe bet' and eliminate the interest-bearing debt vs gambling on a good return rate...but 2% really is so low that almost any safe, conservative investment could beat that. If it were 5 or 6% I'd say pay it off.


So if it were me, I think I'd refi the CC debt into the car loan, make sure to pay off remaining CC debt before the 0% expires, and simply invest or hang onto the inheritance money. If you simply tuck it away in a savings account you can be confident knowing that if something happens you can still easily make auto loan/CC payments, or have it if an emergency comes up. Or if you already have a nest egg in place invest it/put it in retirement. Do you have a retirement account in place? If not I would make that a high priority.


Clearing 2% fixed debt would be a low prioirty.



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