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Personal Finances / Credit Cards and Consumer Debt
|Subject: Re: Settlement||Date: 1/1/2013 12:06 AM|
|Author: 401kinvestor||Number: 306585 of 308722|
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 hospital), and using the other $7k of the money as an emergency fund would mean that you wouldn't be able to post your quarterly debt updates any more because your debt would actually be paid off and you wouldn't be living paycheck to paycheck any more. But that would actually be being financially responsible.....
WAIT HOLD UP MAN I disagree entirely.
I pay pmts on the car so I don't have to give the money to mom and dad. It keeps my credit rating up. I'm not paying the car off.
Currently balance at Schwab: 1) Individual account = $24,727 2) Rollover IRA =$17,209 3) Roth IRA $24,798 4) 401K = $35,437
CD's at Sunwest FCU: $7,400
CD at Nationwide Bank $503.00
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