Originally Posted by Kriz (Post 2977187)

Student loan and pay it off asap, so the 4% on 22k won't hurt you for that long compared to half of the money and half of the rate. Don't get confused because you have to pay more for the car loan than the student loan.

You get the insurance coverage for what you're paying for, so I wouldn't say $140/mo is a total waste. Nobody knows what's going to happen.

It's just my opinion, I don't have the right to tell you what to do lol

Originally Posted by mav1178 (Post 2975350)

Do you have the ability to fix or replace your car on your own if an accident happens? Or what if someone steals it? Or what if a tree fell on it?

If you don't, keep full coverage for your primary vehicle.

Originally Posted by Tcoat (Post 2975612)

There are at least 6 tales of woe where somebody cancelled their collision and then got hit on this forum alone. It is a false savings to not have it.

Originally Posted by why? (Post 2975973)

Do you have the cash on hand to pay off the car? The way to pay off debt is to look at the total amount you owe, and like Dadhawk said pay off the lowest amount first. Having one loan is better than having two.

And keep full coverage on your car. It just takes one unlicensed uninsured driver wrecking your car and you lose it all if you don't have full coverage.

Originally Posted by Dadhawk (Post 2975336)

The difference between a 3% and even a 10% loan isn't your problem, it's getting rid of the total debt. Pay off the lowest balance one first, then roll that payment into the other and pay it off early was well.

That's what I would tell my kids anyway.

Originally Posted by palanza87 (Post 2976471)

always pay off ur highest interest rate first. thats basically it

Originally Posted by Dake (Post 2977790)

I may have missed it, but there's not enough info to make a true comparison if you want to look at the dollars involved. We need to know how many months (years) remain on both the loans.

That being said, both the car and your student loan are compounding interest loans. Your car has less financed at a lower rate and most likely a shorter term. Your student loans are a higher amount and rate and probably a longer term. That means spending the money now to pay down the student loans will save you quite a bit of money in the long run compared to doing the same with the car, even when factoring in decreased insurance costs (which others have mentioned, includes gambling on no accidents). If you have the money to do so, I'd highly recommend paying off the student loans. Don't zero out your account to do it - leave a grand or so for emergencies - but it will save you a chunk of change at the end. If you really want to go nuts, make it a loan to yourself at the same rates. Once you've paid off the loan, start making the same loan payments back into your bank account. That way YOU are making the money on interest instead of the bank.

The only monkey-wrench in all of this is how far into your loans you already are. Most car loans especially are structured to get as much interest as possible early on. If you look at your statement you'll see that a lower percentage of your payment goes towards lowering the premium. If you're past the half-way mark in your loans, you may not see as big of a benefit because the bank has already collected a lot of their interest (but you should still see it).

As for full coverage vs liability, it's a personal decision. I've always felt it's worth keeping full coverage until I get the car's value down to a point where I could easily replace it. Spending a grand a year on insurance for a car with a $15k value? Sure. A $5k value? Not so much.

Originally Posted by NARFALICIOUS (Post 2977841)

There's a difference between risk and fear. According to the industry reports, the average driver files an insurance claim once every 17.9 years.

If someone was diligent, they could put the savings they make from having full coverage insurance into an easily accessible, high interest savings account. If you do this right, you're putting away only the money you would spend on insurance (maybe a bit more), separate from any savings you would put away otherwise.

you could probably just buy a new car in cash every 10-15 years.


This is the debt-snowball method of paying off debt, and works great psychologically. But 3% and 10% is a huge difference on loans that are several thousands of dollars of principal, and thus shouldn't just be dismissed. For someone with experience and can manage the debt, this is not a good way to pay off debt.


This.



This is probably the best advice in this thread. Basically do the numbers and make your own personal decision.



If you do decide to want to go liability only, then even though the car has lower interest, it may save you more money if the amount you'll save on the insurance is significant enough.


Personally, I don't believe in being overly insured (burdened). Not just talking about car insurance but in addition to all other insurances. We can talk about all sorts of anecdotes, someone getting sick, tree falling on house, getting hit at an intersection----but insurance companies exist purely because whatever they're insuring doesn't happen very often. If it did, they wouldn't make money.

If you decide to want to keep full coverage or collision/comprehensive whatever it is, then definitely pay on the student loans.

One thing I would look at (if you're one of these interested in mitigating risk) is how much your car is worth. I looked up on KBB a 14 FRS in my state at 65000 miles Good
condition 10200-11900 trade in value. Unless you have GAP Insurance(another useless coverage), I would at least pay a little extra into your car to make sure you're not upside down and make sure to stay ahead of the value until you do pay it off.

Originally Posted by max20s14 (Post 2977875)

I thought insurance usually covers based on private party value in the area the car is located?
Which for me is about 15-16k according to KBB.

Originally Posted by NARFALICIOUS (Post 2977934)

You may want to confirm with your insurance company.


I found this somewhere online, unverified but it's what I've always heard.

Each insurance company has its own methodology for deciding if a car is totaled and establishing its value. Many states also get into the act, further sharpening the total-loss definition.

Originally Posted by NARFALICIOUS (Post 2977841)

This is the debt-snowball method of paying off debt, and works great psychologically. But 3% and 10% is a huge difference on loans that are several thousands of dollars of principal, and thus shouldn't just be dismissed. For someone with experience and can manage the debt, this is not a good way to pay off debt.

Originally Posted by Jordanwolf (Post 2976601)

That six month grace period isn't real because they accumulate interest on each of those months while not having to make payments.

Originally Posted by Syche (Post 2978374)

oh when I went to school, it was literally called and intrest free grace period, the only stipulation was you had complete the program not drop out but probably changed since then to be honest.

Originally Posted by Dadhawk (Post 2978316)

There are a lot of factors that can play into the decision of what to pay off first, I'm just saying interest should not be the guiding factor.

For example, if you have a loan with a balance of $1,000 @ 3% interest and another of 10,000 @ 10% interest, does it really make sense to focus your efforts on the 5% loan first just because it has the highest interest rate? Adding zeros to the end of each doesn't make the decision make any more sense. (10,000 vs 100,000 etc).

If the balances are equal (or close) then yes it does make sense mathematically to focus on the highest rate first.

Originally Posted by Jordanwolf (Post 2978393)

So I think with the government front-loading more money to students, they kind of entrap them with the idea that they have money to spend, when they really don't and hit them with stealth fees hidden in plain sight. I know a ton of people who spend the grants they receive because they are just silly amounts of money (talking like 3000$+ in grants)...

Originally Posted by Dake (Post 2978405)

I think you maybe mis-typed your numbers? Because with your example, assuming the same terms yes, it makes sense to pay off the higher interest first from a purely monetary standpoint.

A loan for 1000 at 3% for 12 months will pay out $16 in interest.
A loan for 10000 at 10% for 12 months will pay out $550 in interest.

So paying off the larger loan sooner will save up to $534. Obviously, that may not be entirely practical, but money is money and the OP gives the impression he's in a position to pay off one or the other.

I'd really love to see the remaining terms on both the loans. It would make the answer obvious.

Originally Posted by Dadhawk (Post 2978406)

Don't know about Canada vs US, but back when I went to college during the Reagan era student loans and grants were just that, loans for you to go to school. My experience was the most you could get was what matched your college costs, and the money went straight to the school. It wasn't money freely available to do whatever the heck you wanted to with it.

Seems to me, as I put my 3 three sons through college, "student loans" have basically become lightly veiled signature loans that have no direct correlation to the actual cost of attending college. Fortunately for them, they will all graduate without college debt because I insisted they attend colleges "within their means".

Originally Posted by Dake (Post 2978405)

I think you maybe mis-typed your numbers (not sure where the random 5% came from)? Because with your example, assuming the same terms yes, it makes sense to pay off the higher interest first from a purely monetary standpoint.

A loan for 1000 at 3% for 12 months will pay out $16 in interest.
A loan for 10000 at 10% for 12 months will pay out $550 in interest.

So paying off the larger loan sooner will save up to $534. Obviously, that may not be entirely practical, but money is money and the OP gives the impression he's in a position to pay off one or the other.

I'd really love to see the remaining terms on both the loans. It would make the answer obvious.

Originally Posted by Dadhawk (Post 2978413)

No, what I'm saying is if I had $1,000 extra to throw at a loan I'm going to pay off the $1,000 loan and owe $0 in interest on it, rather than reduce the balance on the bigger loan and continue to pay interest on both.

In the end (in my simple way of looking at it) your debt is one big number with some composite interest rate against it. So in your example, you have $11,000 in debt with a combined interest payment of $566 a year. Anything you are comfortable in doing to reduce the overall amount owed quickly is a good thing, so there is not real bad answer. That was my primary point.

Originally Posted by Yardjass (Post 2978428)

Am I missing something here? 10% APR on ten grand for a year is $1000. If you pay off $1000 at the beginning of the year and pay interest on the remaining $9000, you've saved yourself $100. For the 3% loan of $1,000, it is $30 for the year.






See above. Always pay off your highest interest loans first, especially if you're talking a difference of 3% to 10%. If you go in the wrong order on something really expensive like a house, you will end up costing yourself thousands in the long run.

Originally Posted by Yardjass (Post 2978428)

See above. Always pay off your highest interest loans first, especially if you're talking a difference of 3% to 10%. If you go in the wrong order on something really expensive like a house, you will end up costing yourself thousands in the long run.

Originally Posted by Yardjass (Post 2978428)

Am I missing something here? 10% APR on ten grand for a year is $1000. If you pay off $1000 at the beginning of the year and pay interest on the remaining $9000, you've saved yourself $100. For the 3% loan of $1,000, it is $30 for the year.

Originally Posted by Dadhawk (Post 2978413)

No, what I'm saying is if I had $1,000 extra to throw at a loan I'm going to pay off the $1,000 loan and owe $0 in interest on it, rather than reduce the balance on the bigger loan and continue to pay interest on both.

In the end (in my simple way of looking at it) your debt is one big number with some composite interest rate against it. So in your example, you have $11,000 in debt with a combined interest payment of $566 a year. Anything you are comfortable in doing to reduce the overall amount owed quickly is a good thing, so there is not real bad answer. That was my primary point.

Originally Posted by Dake (Post 2978479)

Sorry, I did do the math wrong (out of practice with my financial calculator :D), but it's the other way around. It should be $30.42 and $1047 for the 1000/10000 loans. Because interest compounds monthly and not annually, you pay more than the straight 3% or 10%.



I gotcha. Yeah, the psychological value of getting rid of a debt entirely is valuable. That being said, sending the grand to the higher interest/higher amount loan will still save you more than the interest you lose on the lower/smaller loan. ;)

Originally Posted by Dadhawk (Post 2975336)

Switching to liability only "saves" you money if you don't consider risk. Drop collision, wreck your $15,000 car and it just cost you $15,000 in a few seconds.

I keep collision on all my vehicles (most of which were purchased for cash, and all of which are paid off) because I'd rather pay someone else to carry the risk.

The difference between a 3% and even a 10% loan isn't your problem, it's getting rid of the total debt. Pay off the lowest balance one first, then roll that payment into the other and pay it off early was well.

That's what I would tell my kids anyway.

Originally Posted by VoltsFRS2013 (Post 2976084)

Most car dealers wont even let you take a car from their lot without full coverage insurance. I'm only 18 and that was a huuuge factor in getting my car when i was in the market for it.

Originally Posted by Tcoat (Post 2976194)

Depends on who and where you are. I pay less for this than I did my Lancers. The wife's new Impreza cost more. I doubt that it is much ore that slightly above average for most people. It is individuals that cost more for insurance not the car.

Originally Posted by NARFALICIOUS (Post 2977934)

You may want to confirm with your insurance company.


I found this somewhere online, unverified but it's what I've always heard.

Each insurance company has its own methodology for deciding if a car is totaled and establishing its value. Many states also get into the act, further sharpening the total-loss definition.

Originally Posted by Jordanwolf (Post 2978435)

This is incorrect information as to how interest is calculated, it's not quite as simple as that. It's more like a month to month percentage on what is remaining annually. I can't remember the exact calculations, I just know it's not super simple.

Go to a car website, Subaru for example and attempt to replicate the way the calculate interest on a vehicle. It works something like the first few months of payment, the amount of interest that is being paid is visibly lower, but then as the months go on, the payments to the actual car get smaller and the payments to interest begin to grow. It's kind of why you can save money by putting lump sums down on a car, at least, this is how I understand it, I could be wrong though, someone much more intelligent should correct me :P

Originally Posted by Dave-ROR (Post 2978543)

While true, his example is still an accurate portrayal of the concept.

Min $ comes into play clearly to determine a more detailed result as principal balance is required to calculate each month. IE, that 3% loan could be a $350/month car payment - or it could be a fresh 3 year loan (ok no one would do that I hope, but still).

However, it still doesn't matter.

For easy numbers, if it's the tail end of a 5 year car loan for $20k at 3%, that remaining $1,073 of principal costs him $3 of interest. If it's the fresh 3y $1k loan scenario, the interest over that lifetime of the loan is a whole $47.

There is simply no way that paying that off will ever beat that higher interest loan. Period.

Now, there's a gratification factor in paying off a loan. I get it, and have done so before even knowing it was the worse financial option.

Originally Posted by Dadhawk (Post 2978463)

Yes, if you have the cash sitting around to pay off two loans and one of them has a higher interest rate, absolutely, no argument.

In the case where you have $1,000 to throw at your debt, I'm just saying my preference is to pay off what I can with the money rather than throwing it towards a higher interest loan and leaving the smaller debts in place.

Maybe it doesn't make math sense (never said it did, or at least didn't tend to) but math isn't always what matters to everyone. If math really mattered you probably wouldn't be in debt to begin with.

(Now starts the debate about using "someone else's money" when the rate is low enough)

Originally Posted by Dave-ROR (Post 2978525)

Location kills me.. I have no accidents or tickets and pay a shitload. Stupid Florida.

Originally Posted by Tcoat (Post 2978565)

Originally Posted by Tcoat (Post 2978565)

Originally Posted by Jordanwolf (Post 2978589)

fuck tcoat, this is my type of woman too. STOP POSTING THIS SHIT I CAN'T OPEN THESE THREADS NO MORE. I had to double take ffs

Originally Posted by Dadhawk (Post 2978463)

Yes, if you have the cash sitting around to pay off two loans and one of them has a higher interest rate, absolutely, no argument.

In the case where you have $1,000 to throw at your debt, I'm just saying my preference is to pay off what I can with the money rather than throwing it towards a higher interest loan and leaving the smaller debts in place.

Maybe it doesn't make math sense (never said it did, or at least didn't tend to) but math isn't always what matters to everyone. If math really mattered you probably wouldn't be in debt to begin with.

(Now starts the debate about using "someone else's money" when the rate is low enough)

Originally Posted by Dadhawk (Post 2978579)

Probably not going to be approved after this week..hope you survived relatively unscathed but those of us in Georgia appreciate you all taking one for the team.

Originally Posted by Tcoat (Post 2978594)

This is a sort of safe word (well pic) that Dadhawk asked me to use if he got too far into financial debates. Have had to break her out in a couple of years now.

Originally Posted by wallaby (Post 3414605)

I am also a student and I bought my GT86 using a loan. This was the best choice that I made, because it's not so expensive to pay it. As a student, I was given the best terms and prices. So I see only advantages.

Originally Posted by Tcoat (Post 3414620)

Spambots have loans?

Originally Posted by Sasquachulator (Post 3414630)

loanbots

Originally Posted by Tcoat (Post 3414620)

Spambots have loans?