The Motley Fool Discussion Boards
Personal Finances / Credit Cards and Consumer Debt
|Subject: Re: Settlement||Date: 1/1/2013 12:06 AM|
|Author: 401kinvestor||Number: 306585 of 309666|
Why are you not going to pay off your $13k car loan?
Oh, wait, you're trying to make money from arbitrage, because you are getting a 2.8% yield from JPM, while your car loan is 'only' costing you 2.49%.
But after taxes, you are going to be losing money. Even if the 15% tax rate survives the fiscal cliff, adding on 3.36% or 4.24% Arizona state tax, you will lose 18% or 19% from your 2.8% dividend rate, so you will net, at best 2.3% - which is less than your car loan rate. And if the Federal rate on dividends does go up to ordinary income rates, it will probably be a 28% or 29% loss to taxes, netting you about 2.0%
But wait, there's more....
Paying off your car loan with the $20k (assuming the other money is actually going to the insurance company and hospita