Quote:
Originally Posted by wilsonp
Assuming you have to use the 35K to payoff the loan, aren't you making a decreasing difference? How much can you actually make in the end?
And if you don't use the 35K to payoff the loan, you have to take into account that extra money you are putting into the loan instead of saving - how much would you have made saving that payment?
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On an auto loan of $35,000.00, with an interest rate of 2.5% for 60 months, your monthly payment is $621.16. At the end of your term, you will have paid $35,000.00 in principal and $2,269.46 in interest for a total payment of $37,269.46.
A 2.5% CD with $35,000 in it will become $39.655.04 after 5yrs.
That's at the same exact rate, because the interest you pay on a loan is based on what you owe at the time, where your interest in investement compounds on itself. Compounding interest is your friend.
Personally, even taking that $35k and putting it towards my mortgage would be better for me (and probably almost everyone else as well). My mortgage is 30yr fixed at 3.75%...which is pretty damn low for a house that's not an ARM, but still higher than my car.