Hello, Friend got a new truck. Price of truck OTD = $45k Down payment at time of finance = $2k ($43k financed) Interest = 6.9% Total for 75 months = $55.5k roughly which means it’s about $10k of ONLY interest. Payment = $710/month
Correct me if I’m wrong but in theory this truck can be paid off tomorrow and my friend pays none of the $10k interest, right? Anyway, my friend has a check that he wants to use of about $23k. My question is: is it better to put the $23k towards the auto loan right now (ensuring that the money goes towards the principal) or is there a better alternative like placing the money in a HYSA and earn about a 5% interest (I know it can fluctuate) and use that account to pay off the debt gradually? He’d be paying a lot more than the minimum monthly as well. I guess the only upside to this is though is having more cash liquid if ever needed.
Yes. Anything you pay over the monthly payment will go to principal. If hes got the money and can spend it for something like this and doesn’t truly need it for anything else. Go for it.
He will take a bit for a bit on his credit score cuz he lost a line of credit paying it off. 10-15ish points probably/maybe. But it will Bounce back quick.
Or pay off 90+% in one go and have a small 1200$ ish left and make baby payments (the due dates will be very long cuz he payed ahead almost all of it) until that is gone if he wants/needs to bolster some credit history.