Should I pay off after getting laid off?

[CallinBatonRouge]

As others have said, take the money you'd use to pay it off and throw it into a 4% T-bill or something, you might earn a free payment (or half one) from it. Free money.

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[Boosted Pony]

He has to have the $4,000 dollars to pay off the car no matter if he does it by monthly payments or if he just closes out the loan now. Either way he has to have $4,000 dollars to pay to the lender so pay it off and be done with it. Many of these posts are not taking this into account, they are just saying take the money and put it into a money market type account and earn interest but he still has to pay the money to the lender so how does him taking $4,000 dollars and putting it into an account that he will be penalized if he has to withdraw it early going to help him, he still has to pay the lender either way.

Doing it the way many are telling him to he is tying up $8,000 dollars of the money he has, $4,000 going into an account to earn some interest on which will not be very much and he still has to pay the $4,000 dollars to the lender.

 

[EFI]

but he still has to pay the money to the lender so how does him taking $4,000 dollars and putting it into an account that he will be penalized if he has to withdraw it early going to help him, he still has to pay the lender either way.

Right, but anytime you have money sitting in some sort of account you're earning some interest back. And you can put it into a savings account that doesn't penalize you.

For example take a lowly savings account offering 4% APY. First month he earns $4,000 * 0.0033 = $13. Then next month he makes a payment and only has $3,300 left and that earns him $3,300 * 0.0033 = $11. Next month he makes another payment and only has $2,600 left that earns him $2,600 * 0.0033 = $9. And so on and so forth until he has nothing left in his account and the car is paid off. But in the end, he is still left with something rather than nothing.

Now that may not seem like much to you, but when you're unemployed any little bit counts and that doesn't take into consideration the fact that you have some extra cash for a few months. And this is a small example, if you take that calculation for a full term loan it's going to be thousands of dollars that you earn while paying off 0% interest.

 

[thompsje]

He has to have the $4,000 dollars to pay off the car no matter if he does it by monthly payments or if he just closes out the loan now. Either way he has to have $4,000 dollars to pay to the lender so pay it off and be done with it.

While I agree that there isn't much (if any) money to be made off a $4k short term investment, at 0% there isn't any real loss either. There is an argument about the NPV vs inflation, but over 4 months that probably isn't significant either. At $791/month (or whatever) you're probably looking at less than $5 actual difference.

Keeping the cash on hand is a better play for unexpected expenses since nobody is going to repossess the car for a single missed or late payment at this point either.

 

[JRV1631]

0%… keep making payments until you at least get hired on somewhere. Keep the extra money in your pocket… just incase.

Agreed, it costs you nothing to drag it out and until you get settled, you keep cash in hand.

 

[green97probe]

My employer isn't in a great financial position right now, and my GT was due to be paid off this September.

I had the extra money, so I paid it off six months early. I'm more comfortable without that extra bill every month.

OP, use whichever option makes you most comfortable given your situation.

 

[mc68386]

Oh ya. My fucking COBRA payment to keep my Health Insurance comes out to 1100$ a month till I find a new job. But that doesn't start till May.

Not sure about your situation, but from past experience, COBRA prices can be really inflated. It might be worth it to shop around and look at Obamacare or whatever.

 

[dps]

I have, I think, 5 more payments left. 718$. But I just was laid off. Would you just bite the bullet and pay off the car or just try and make it work? I have 0.00% APR. And everyone keeps telling me not to pay it off because its free money. I just feel better if I would get rid of that payment.

I've already landed positive interviews somehow. So I'm not dead in the water. I received my PTO pay out and have a severance coming on Friday. Should put me way over the amount needed to pay it off. So I will have plenty of money if I do. But would you? Or would you just ride it out because its 0.00% APR?

I can't wait to be done with this payment. Most expensive thing I have ever bought in my life.

At 0% - keep making payments...unless you'll sleep better at night knowing it is paid off. If so, pay it off.

 

[Garfy]

I have, I think, 5 more payments left. 718$. But I just was laid off. Would you just bite the bullet and pay off the car or just try and make it work? I have 0.00% APR. And everyone keeps telling me not to pay it off because its free money. I just feel better if I would get rid of that payment.

I've already landed positive interviews somehow. So I'm not dead in the water. I received my PTO pay out and have a severance coming on Friday. Should put me way over the amount needed to pay it off. So I will have plenty of money if I do. But would you? Or would you just ride it out because its 0.00% APR?

I can't wait to be done with this payment. Most expensive thing I have ever bought in my life.

With no interest on the loan, you don't have to pay it off. However, I would caution you to NOT spend any more money on other things that would've normally gone to the car. It's easy to get caught up in the "I've got lots of money so I can buy such and such..." Just carefully watch your budget until you get your new job. BTW, how did you get such a sweet deal, 5 payments for a total of $718? Or did you mean each payment is $718? Anyway good luck on a new job!

 

[cocopanda]

With no interest on the loan, you don't have to pay it off. However, I would caution you to NOT spend any more money on other things that would've normally gone to the car. It's easy to get caught up in the "I've got lots of money so I can buy such and such..." Just carefully watch your budget until you get your new job. BTW, how did you get such a sweet deal, 5 payments for a total of $718? Or did you mean each payment is $718? Anyway good luck on a new job!

It was originally a 6 year loan at 718$. I just have 5 payments left of the 60 payments.

And thank you very much for your kind words.

 

[dirtwarrior]

We don't k now your situitation. Pay it off or not it is up to you

 

[Roy_Steeda]

You have to do what's best for you. I would do what I can do, but comfortably.

 

[Unas2k5]

Zero reason to pay that off early.

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