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Author: snapperusmc Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 72  
Subject: Poll: Which road? Date: 3/4/2004 8:20 PM
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Invest all $3,500
Use all $3,500 to pay down the Mort, car pmt, stud loan
Do a blend of payment on debt and investment with the $3,500

Click here to see results so far.

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Author: pepperpear Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3 of 72
Subject: Re: Poll: Which road? Date: 3/5/2004 11:15 AM
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It depends on the answers to the following:

What are the interest rates on your current debt?
Do you have an adequate emergency fund?
What return do you think you would get on investments?

Congratulations on finding yourself in this happy situation!
__Sharon

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Author: Zannikin Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4 of 72
Subject: Re: Poll: Which road? Date: 3/5/2004 2:06 PM
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I'd like a stud loan, please. How long do I get to keep him? :-D

I voted to use the $3,500 to pay down the Mort, car, and student loan, but that's not exactly how I feel.

I wouldn't personally consider a car loan to be "good" debt, but consumer debt. I would use the $3,500 to pay down the car loan, but it depends on the rate you're getting. If you've got a 0% or .9% loan, I'd keep it. Then maybe the student loan, depending on how low your interest rate is and whether you're able to deduct the student loan interest.

I would invest before paying down the mortgage unless you've got a pretty high mortgage interest rate.

Zanne

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Author: snapperusmc Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5 of 72
Subject: Re: Poll: Which road? Date: 3/5/2004 5:16 PM
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Sharon,

Well, my mortgage is 6.25%
Auto loan is 7.25

I expect the market average on my investments.

Thanks for your time in helping us find the right road to take.

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Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6 of 72
Subject: Re: Poll: Which road? Date: 3/5/2004 5:26 PM
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Auto loan is 7.25

Does your auto loan have a prepay penalty? Is interest calculated based on "simple interest" or "rule of 78"?

Do you have a fully-funded emergency fund?

If you have a fully-funded emergency fund, and if your auto loan has no prepay penalty and the interest calculation is based on "simple interest", I would be inclined to pay off the car loan or split the money between paying down the car loan and investing. If you would be reducing the insurance coverage on the car after it is paid off, no prepay penalty and "simple interest", I would suggest 100% extra towards car loan.


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Author: pepperpear Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7 of 72
Subject: Re: Poll: Which road? Date: 3/5/2004 6:18 PM
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Well, my mortgage is 6.25%
Auto loan is 7.25


And the student loan?

Mark0Young has answered better than I can.

The general wisdom is to balance one's need for a liquid e-fund, with earning a higher return on one's money elsewhere.

Paying more on a loan is like earning the loan's interest rate on one's money -- risk-free, to boot. Mark pointed out some subtleties about that general rule though, e.g. simple interest, pre-payment penalties, etc. Apart from that, if you decide on the extra debt payments, in general you would pay down your highest interest rate debt first.

Don't know a generally accepted figure for "market average" on investments right now. You should find that out. But of course it's all in the future, so the best anyone can do is say "this is my best guess of the ranges/upside potential/downside potential/probabilities over my expected timeframe." But if you're going to invest that's something you have to get comfortable with. (Hmmm, I just realized that's part of a big personal hurdle for me.) And of course it depends on what you invest in. Index funds? Gold ingots? Shares of MSO? I don't know the answers for any of those, I just know the questions.

Best wishes,
__Sharon

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Author: snapperusmc Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 8 of 72
Subject: Re: Poll: Which road? Date: 3/5/2004 7:36 PM
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Sharon,

Thanks again. The student loan is at 4%.

Since I expect the market average over my lifespan to be around 10-11% and the poll indicates that I should consider a blend, and with Mark's input; my decision is leaning towards: paying off my auto loan with 100% of the $3,500, then pay usual payments for student loan and mortgage since the interest is tax deductible/adjustable, and start putting the $3,500 in the market.

I'm a long-time stock investor and president of 2 investment clubs that are keeping up with and beating the market so I'm pretty comfortable in my ability to pick and invest in stocks. I've been a Fool since the beginning and used to hold a Foolish-4 portfolio and am currently building a Rule Maker portfolio.

With all of that said, I had to ask for opinion about 'which road to take' because I'm unsure about where the tradeoff meets in paying down debt and investing.

Thanks to you and everyone who's voting, I'm getting a solid answer and it's helping me with my future.

Thanks again...

Snapperusmc

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Author: badger95 Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9 of 72
Subject: Re: Poll: Which road? Date: 3/26/2004 1:42 PM
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Snapper,

You may want to look into refinancing that mortgage. I am not exactly sure what rates are now but you may be able to save on your monthly payment...especially if you know you are not going to be in your house long and can do a five year ARM with lower rates. If you have enough equity in the mortgage you could also use that for a lower rate loan on your car and get rid of the 7.25.

Semper Fi

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