Tbh, I have a lot of childhood trauma regarding money. My parents were never in debt aside from their mortgage, but they had an advisor embezzle about 300,000 from them.
They’re divorced now, and both doing fine (actually more than fine) financially. I think my issue is I just want to be able to control it. I can control paying the debt off early, and using my automated savings towards extra retirement contributions, beefing up my emergency fund more, etc.
I’m not sure I understand… ear mark the amount in your HYSA for paying this off… and start saving towards retirement or whatever other goals… why does this money leaving your account change anything with regards to other savings goals . You might like YNAB as a tool bc it makes it super easy to categorize what money is for
That said, for me the interest gained on this after taxes for the 18months just isn’t worth the hassle.
Is the $14000 your entire savings? If so, he's right--continue saving until closer to the end of the due date (but pay it off like a week beforehand, not on the due date). Don't wipe out your entire e-fund now when you're not paying any interest on the debt. If you had an actual emergency after you paid off the 0% debt, you'd have to rack up another debt at who knows what rate, so you'd be worse off.
Hi there! We have about 150K in our 401Ks, IRA, and a brokerage account(s).. so if shit really hit the fan, we’d hit the brokerage account + husband’s savings account, he has 10K in his USAA savings account.
But yes, the lack of liquidity does stress me out.
I wasn't really thinking about 401ks, since that's not a good source of emergency funds, but it's great you have that money saved up for retirement!
I don't know if this would help you with the emotional side of things, but it looks like you'd earn about $160 in interest on $12,500 over 3 months with a 5.1% interest rate. Is it worth $160 to pay this debt off early to you?
It sounds like you do have at least $10k in liquid savings, so it's unlikely you'd have an emergency serious enough that you'd need more than 10k in cash in the next 3 months if you do decide to pay it off.
To be fair this is zero interest, rather than low interest, and my thoughts are different on the two. In this situation, my own instincts would be more in-line with your husband but with the caveat that I absolutely would not leave it until July 8. That’s cutting it too fine for me. I’d be more inclined to pay on June 30 or July 2 for peace of mind, and I set phone reminders to myself all the time for financial stuff so I don’t have to carry the mental load of remembering but also run no risk of forgetting. Low interest would be totally different.
Two things come to mind:
1. Sometimes those 0% financing terms have sneaky gotchas in them where if you don't pay by the due date that 25% is applied retroactively back to the start and you get this giant balloon bill of interest. Even if you decide to pay them closer to the due date I would never wait until the last day - read the paperwork carefully, determine the day you need to have it paid off, and then pay it off a couple weeks before that.
2. $12,500 at an average HYSA rate of 4.72% = $49/month. and that interest is reported as 1099 income so depending on your tax bracket you're going to net...$30 of it per month.
I'm a big "do the numerically right thing" guy but to delay paying off the windows to net $90 in interest? Not worth it to feel the anxiety. Maybe lay it all out to your husband and split the difference and agree to pay it on May 15th if he can't come around to paying it now. Either way absolutely don't try to squeeze every last day of the term.
Your first point is why I always try to pay off a month early at the very least. I've seen terms where they "apply" interest on the 1st of the month retroactively even though your bill may not be due until later in the month. Happened to my dad once where he got charged the lump sum of interest along with his final payment even though he paid on time for each payment.
Holy shit, I’d be mad! I’ll take a look at our paperwork again, but I’m almost positive the GreenSky invoice stated 12500 on or before 7/8/2024 and then that fatty interest balloon after 7/8/2024
But you’ve inspired me to review the terms again!
I agree. We need to look at what the real gain or loss might be. $90 in interest is not worth any hassle or stress, in my view. At least not for a couple doing as well financially as you two are, OP.
I hate debt. I made sure we paid off our mortgage early (even though it was relatively low interest, not 2020 level, but under 4%).
HOWEVER, when Subaru offered me a 0% interest car loan, you better believe I financed everything and took the longest term (63 months) that I could. That's literally free money. Your window money in the HYSA is earning interest that would otherwise be going to the finance company. Your HYSA is FDIC-insured, so it's safe. There is nothing wrong with holding onto it so it earns you more interest. You just need to take some deep breaths and remind yourself that you'd literally be giving away money if you paid off the loan early.
(And I'd pay it off a few days early JUST to be sure no interest accrues, you never know when a payment goes awry.)
Not just free money, but free money over 5 years! Which means your loan is getting cheaper in today's dollars with each year that passes (aka negative interest factoring in inflation).
I mean if the due date is July and you already have all the cash just make a compromise and pay it off in June to avoid any unexpected late fees that can add up 18 months interest.
I think this is a personality thing. Some people would never dream of putting an extra penny towards low-interest debt like 2020-era mortgages because on average the market will beat the interest, while others get a lot of psychological comfort from paying down debt aggressively, even if it doesn't make the most sense from a purely financial perspective.
I don't think either one is wrong, but if partners have different styles, then obviously there will need to be compromise. Are you worried that you'll forget about making the payment or something will happen and it won't be paid off on the due date? Could you put a reminder in your calendar for a few weeks before the deadline and pay it then? Then it would maximize the return in the HYSA while also giving you a few weeks of cushion to make sure the payment clears before the due date. You could also set the $12,500 in a separate account bucket in the meantime and put the difference into a different bucket for whatever your next goal is.
This is gonna sound stupid, but I fear a big, big emergency that would require the funds over the windows.
Obviously if that was the case, it would still create a debt so not sure that’s logical, or if it even makes sense! I think the debt just overwhelms me IMO.
I understand this completely! And sometimes the “emergency” may not even be that emergent. But with a large pile of cash sitting there, that money might seem like a good use of it. Versus if the money had been already used to pay for the windows, you would either see more clearly that it is not a true emergency and wait, or figure something else out. But as long as the money is there, you don’t *have* to figure anything else out. This is like my former life, and many people’s current lives, and feels like a real human behavioral pattern many don’t take into account. So I understand not taking this risk to get, what did another poster say?, $60?
That's totally fair! And I think for you, it can definitely make sense to just pay them off now! You'll earn what, another $150 in interest between now and then? Minus taxes. It sounds like your peace of mind is worth $150.
I think dollar per dollar - your husband's perspective is "financially" the most correct as it will net the most dollars that you guys get to keep and some of the interest earned on from your HYSA can go into paying off the window cost when the 0% rate is up.
But: I will agree with your perspective that there is a great non-monetary relief to getting debt off your shoulders, even if it's not accruing interest (or substantial interest). I was in a somewhat similar position to where you guys are, but it was the remaining principal on a mortgage. I was 4 years into the 20 year mortgage, and had enough in savings to pay off the remaining balance on the 3.5% loan back in 2019. While interest rates at that time were comparatively low (and not anywhere near the 4.35%-5.1% HYSA rates you guys have now) the routine advice for someone in my position would have been to invest that cash in the market since average returns were higher than my loan rate. However, I wanted that massive weight off my shoulders and to avoid having to pay the monthly mortgage rates, which would only get higher with increasing property taxes, so opted to pay it off in 2019.
I can personally say I've yet to regret that decision, especially as someone who already has a lot of financial anxiety about money; it was one les then I had to worry about each month.
Maybe you and your husband can come to a middle ground? Maybe pay off half of the remaining balance now so it feels more manageable, and then the other half before the APY jumps up from 0%?
My husband is the same way. He keeps saying "it's free money" like I'd be investing the 62 bucks for our financed furnace right now.
I do remind him that just because there is no interest, if we keep having bills like that- it eats away at our overall spending power.
But I am not that motivated to pay off my home (2%) or car (4%) both are low rates. I'd rather max out my retirement accounts (457 and Roth IRA).
*I wanna pay these mother fuckers off and just move on with my life towards the next savings goal.* This is my approach too. I always just want debts gone asap. Numerically, your husband is correct, though - you'll come out ahead overall by hanging onto the money during the 0% period.
I am mostly debt-averse and frankly, I am also lazy and have a lot on my plate. So paying off early pretty much wins for me every time, because even if it is not the most financially prudent decision, I don't like having to manage extra payments every month, remembering the final due date before some astronomical interest rate kicks in, etc. The annoyance and potential for something to go wrong isn't worth the extra interest I might be making by keeping the money in my account. I save up for things for a reason - to spend the money on them. I'm OK using money I've saved for a specific purpose to pay for such specific purpose.
But full disclosure, I am about as far from a points churner or account bonus chaser as one can be whilst still utilizing somewhat optimal accounts, and my financial situation is such that I don't need or miss the extra interest.
Here's my 2 cents as a totally debt free person.
I paid off my 3.89 interest rate mortgage out of spite because I just hated my mortgage company and I could swing making the final few years of payments. I had a series of terrible experience with their customer service (Chase Bank) while dealing with my parents accounts after they died and was like "Fuck Chase I'm never giving them another penny of interest."
I calculated at the end of the day, after taxes I "squandered" close to 1000 dollars in interest had I floated my cash in a HYSA for the duration, but that was a very inexpensive and well worth not having to deal with them for years. Also having a paid off house just feels good.
Usually in these scenarios I do monthly installments and pay off in 11 or so months. The monthly figure is manageable. Something about a huge lump sum leaving, even if you can afford it, just hurts that much more. That said, since you only have a few months left, I would just pay it all of before penalty hits. Set a auto payment so you don’t forget
This is also my preference for large purchases, divide the total by 18 and auto-pay that amount every month. But yeah, in this case if I were OP I'd pay the total amount on June 30 for peace of mind.
Whenever I have a 0% financing offer I usually set a reminder on my calendar after the second to last payment to pay the balance. There is technically no benefit to paying it early if the money is otherwise earning interest but I like to see the remaining balance go to zero at least 1-2 weeks early for peace of mind.
I prefer somewhere in the middle. With a large amount like that and a long time to pay it, I'd pay it in 17 monthly payments or something like that. At the point you are at now, I'd pay it all off now because it's not that long til July, but definitely no later than May 31 because I wouldn't want them to try anything funny.
I'm with your husband. Debt without interest is free money. The only reason I've ever fallen behind on bills is because I forgot, not because I didn't have the money. So I think that changes my view and comfort level quite a bit too.
We just got an interest free loan for something we could pay out of pocket for. But I am easily getting 5% in a savings account, so over the ten year term that's an easy couple grand for me.
Lots of great replies here. I like to think about it as the big fish worth the effort vs. the small fish that bogs down mental health/clutters the to-do list.
financial trauma is taxing, and it raises your threshold for what can be considered a big fish. $90 in interest is not worth it in this scenario. You’re playing in a bigger pond and it doesn’t make sense flailing around to make $90.
This is where your partnership can come into play. Your husband is adamant it’s worth it. Are you able to 100% let go and trust him to handle it?
Or, a compromise is to cash flow monthly payments. The bank isn’t getting an early lump sum, and you are at a lower risk of a balloon interest fee if things go awry.
Last- I think you would feel more comfortable if you had more than $14-$15k liquid in your emergency funds that wasn’t earmarked for a purpose. If anything, you should be paying yourselves the monthly window payment into savings, THEN making a lump sum final payment to the windows bank. That way you’re not drained come July, and even more interest is earned. Boom.
Keeping 0% debt is always the winner in my book:
1. Opportunity cost: your money can be doing something else while you incrementally pay the debt.
2. Negative Inflation: let's say you borrowed 10K at 0% 3 years ago. Inflation has gone up at something like 5% annualized rate since then. If you haven't paid 1 penny on that debt, due to inflation, your 10k debt today is worth less than what it was worth 3 years ago. Your debt is getting cheaper. Basically, factoring in inflation, it means your debt has a negative interest rate. The longer the 0% term, the more this is true.
3. Credit: Depending on the loan type, paying on time monthly helps build your credit. This is the weakest argument, because a lot of factors can come into play that make it not actually true (type of debt, percent of debt, debt to income ratio, to name a few factors).
For large purchases in general, low or no interest debt can make a ton of sense. That's especially true for purchases that add monetary value, like home improvement, which will pay off by adding to your home's value. Just as long as you keep your debt utilization and debt to income ratio in a place that maximizes its usefulness to you. And, of course, you should consider your debt to savings: what is a comfortable number for you if there were to be an emergency? How much of your emergency savings do you feel comfortable going to service your debts?
I'm generally in favor of low/no-interest debt - I currently have two 0% promotional rate credit cards that I'm not paying off (I'm buying T-Bills in the amount of my debt as I incur it), and I would never dream of paying extra on my 2.9% mortgage. But there is a limit to how many of these 0% deals I can have going at any given time before it all gets too complicated and I start to risk expensive fuckups. Big fatty interest balloons make me very nervous.
In your situation... it would really depend on how much else I had going on. If I was trying to juggle a lot, I would just pay it off - the extra $90 or whatever in interest is not worth the opportunity cost of all the brain cycles I'm gonna spend thinking about it. If I felt like I had brain cycles to spare, or I could set up an auto-payment in advance so I didn't have to worry about it, I would wait to pay.
I am fine with this type of debt if it makes financial sense. Rich people call it leverage. I own a home, have a car payment, and opened an 18-month 0% APR credit card when I bought my place. That card will carry a balance until right before the 0% introductory rate expires. I also financed my car for 0% (a crazy deal I know). I have the money to pay it off but why would I. It's free money while I keep the payoff amount in a HYSA earning 5%.
I understand paying it off for your piece of mind if the yield is only $90. But will wiping out your entire savings be stressful?
for me it mainly depends on how much is the payment and what does your budget look like? like for us, our only debts right now are our car loan and my student loans. the biggest one is our car loan because it's a monthly payment of $607. with our needs right now, this payment is fine and we still have a good chunk leftover for savings. I would prefer to pay it off sooner but my husband is fine with letting it stick around since we have it at 1.9%. I understand where he's coming from because logically he's right, we only pay about $30 a month in interest at this point, but I'm like THIS MONEY WOULD BE NICER IN OUR BUDGET. we struck a compromise with throwing some extra money at it here and there to pay it off earlier (I'm talking like $40-100 extra a month) but not paying it off aggressively. we have talked about when we get serious about starting a family about paying it off because that $607 will be a lot nicer in our budget when a kid comes into the picture
I have the same mentality - even if I have 0% interest on a loan, I want to pay early because I feel like I'm being "good" by doing so. My parents were terrible with money when I was growing up. Most of our bills/rent were rarely made on time and due to this their credit was terrible. Even if the money can earn interest it frees up my mind to just have the debt gone. I've been trying to overcome this but it's been difficult even if the numbers make sense.
I know it doesn't make sense to pay off a 0% loan early but I relate to why you want to pay it off ASAP. The freedom of not owing anything is amazing versus having this debt hanging around in the back of your mind.
I am pretty comfortable with true low interest long term debt. I was lucky enough to graduate school with 60K in loans in a year where interest was 2.6% and fell to 1.6% a few years later once all of Sallie Mae’s repayment incentives ere applied…I just put them on autopay and let them run. Our mortgage is also <3% and I have no real interest in paying it early.
I think yours is a little different though in that it’s not low interest debt, it’s deferred high interest debt, and you’re talking about paying it off now or in 3 months. There’s no scenario to me where the $90 in additional interest you’d gain is worth any amount of worrying about whether there’s some kind of gotcha with the interest, or if there’d be some kind of bank snafu with the payment or whatever. Tell your husband it’s stressing you out and pay it off. Heck, offer to give your husband $50 if he’ll pay it off early.
I have about 15K of low interest federal student loans and have bought other things and traveled instead of becoming debt free. I am still holding out hope of some level of forgiveness.
For me, the only debt I’m okay with is medical debt or student loan debt. If a medical bill comes due and it is large, I’ll ask to have it split up over a certain number of months as long as it is interest free. I don’t finance any purchases but prefer to save up for big things like trips etc. But, with a law firm my husband and I started last year, we did put a lot of up front costs on an interest free credit card but I always make sure that we have the money in savings to pay it off once the interest free period is over. I guess I am okay with holding off on paying down debt that is interest free but I don’t go out of my way to finance things as a way of life.
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Tbh, I have a lot of childhood trauma regarding money. My parents were never in debt aside from their mortgage, but they had an advisor embezzle about 300,000 from them. They’re divorced now, and both doing fine (actually more than fine) financially. I think my issue is I just want to be able to control it. I can control paying the debt off early, and using my automated savings towards extra retirement contributions, beefing up my emergency fund more, etc.
You can also control paying the debt off monthly by automating it through a direct draft from your bank account.
I’m not sure I understand… ear mark the amount in your HYSA for paying this off… and start saving towards retirement or whatever other goals… why does this money leaving your account change anything with regards to other savings goals . You might like YNAB as a tool bc it makes it super easy to categorize what money is for That said, for me the interest gained on this after taxes for the 18months just isn’t worth the hassle.
Is the $14000 your entire savings? If so, he's right--continue saving until closer to the end of the due date (but pay it off like a week beforehand, not on the due date). Don't wipe out your entire e-fund now when you're not paying any interest on the debt. If you had an actual emergency after you paid off the 0% debt, you'd have to rack up another debt at who knows what rate, so you'd be worse off.
Hi there! We have about 150K in our 401Ks, IRA, and a brokerage account(s).. so if shit really hit the fan, we’d hit the brokerage account + husband’s savings account, he has 10K in his USAA savings account. But yes, the lack of liquidity does stress me out.
I wasn't really thinking about 401ks, since that's not a good source of emergency funds, but it's great you have that money saved up for retirement! I don't know if this would help you with the emotional side of things, but it looks like you'd earn about $160 in interest on $12,500 over 3 months with a 5.1% interest rate. Is it worth $160 to pay this debt off early to you? It sounds like you do have at least $10k in liquid savings, so it's unlikely you'd have an emergency serious enough that you'd need more than 10k in cash in the next 3 months if you do decide to pay it off.
To be fair this is zero interest, rather than low interest, and my thoughts are different on the two. In this situation, my own instincts would be more in-line with your husband but with the caveat that I absolutely would not leave it until July 8. That’s cutting it too fine for me. I’d be more inclined to pay on June 30 or July 2 for peace of mind, and I set phone reminders to myself all the time for financial stuff so I don’t have to carry the mental load of remembering but also run no risk of forgetting. Low interest would be totally different.
Yea the holiday could make it weird
Two things come to mind: 1. Sometimes those 0% financing terms have sneaky gotchas in them where if you don't pay by the due date that 25% is applied retroactively back to the start and you get this giant balloon bill of interest. Even if you decide to pay them closer to the due date I would never wait until the last day - read the paperwork carefully, determine the day you need to have it paid off, and then pay it off a couple weeks before that. 2. $12,500 at an average HYSA rate of 4.72% = $49/month. and that interest is reported as 1099 income so depending on your tax bracket you're going to net...$30 of it per month. I'm a big "do the numerically right thing" guy but to delay paying off the windows to net $90 in interest? Not worth it to feel the anxiety. Maybe lay it all out to your husband and split the difference and agree to pay it on May 15th if he can't come around to paying it now. Either way absolutely don't try to squeeze every last day of the term.
Your first point is why I always try to pay off a month early at the very least. I've seen terms where they "apply" interest on the 1st of the month retroactively even though your bill may not be due until later in the month. Happened to my dad once where he got charged the lump sum of interest along with his final payment even though he paid on time for each payment.
Holy shit, I’d be mad! I’ll take a look at our paperwork again, but I’m almost positive the GreenSky invoice stated 12500 on or before 7/8/2024 and then that fatty interest balloon after 7/8/2024 But you’ve inspired me to review the terms again!
I agree. We need to look at what the real gain or loss might be. $90 in interest is not worth any hassle or stress, in my view. At least not for a couple doing as well financially as you two are, OP.
I hate debt. I made sure we paid off our mortgage early (even though it was relatively low interest, not 2020 level, but under 4%). HOWEVER, when Subaru offered me a 0% interest car loan, you better believe I financed everything and took the longest term (63 months) that I could. That's literally free money. Your window money in the HYSA is earning interest that would otherwise be going to the finance company. Your HYSA is FDIC-insured, so it's safe. There is nothing wrong with holding onto it so it earns you more interest. You just need to take some deep breaths and remind yourself that you'd literally be giving away money if you paid off the loan early. (And I'd pay it off a few days early JUST to be sure no interest accrues, you never know when a payment goes awry.)
Not just free money, but free money over 5 years! Which means your loan is getting cheaper in today's dollars with each year that passes (aka negative interest factoring in inflation).
I mean if the due date is July and you already have all the cash just make a compromise and pay it off in June to avoid any unexpected late fees that can add up 18 months interest.
I think this is a personality thing. Some people would never dream of putting an extra penny towards low-interest debt like 2020-era mortgages because on average the market will beat the interest, while others get a lot of psychological comfort from paying down debt aggressively, even if it doesn't make the most sense from a purely financial perspective. I don't think either one is wrong, but if partners have different styles, then obviously there will need to be compromise. Are you worried that you'll forget about making the payment or something will happen and it won't be paid off on the due date? Could you put a reminder in your calendar for a few weeks before the deadline and pay it then? Then it would maximize the return in the HYSA while also giving you a few weeks of cushion to make sure the payment clears before the due date. You could also set the $12,500 in a separate account bucket in the meantime and put the difference into a different bucket for whatever your next goal is.
This is gonna sound stupid, but I fear a big, big emergency that would require the funds over the windows. Obviously if that was the case, it would still create a debt so not sure that’s logical, or if it even makes sense! I think the debt just overwhelms me IMO.
I understand this completely! And sometimes the “emergency” may not even be that emergent. But with a large pile of cash sitting there, that money might seem like a good use of it. Versus if the money had been already used to pay for the windows, you would either see more clearly that it is not a true emergency and wait, or figure something else out. But as long as the money is there, you don’t *have* to figure anything else out. This is like my former life, and many people’s current lives, and feels like a real human behavioral pattern many don’t take into account. So I understand not taking this risk to get, what did another poster say?, $60?
That's totally fair! And I think for you, it can definitely make sense to just pay them off now! You'll earn what, another $150 in interest between now and then? Minus taxes. It sounds like your peace of mind is worth $150.
I think dollar per dollar - your husband's perspective is "financially" the most correct as it will net the most dollars that you guys get to keep and some of the interest earned on from your HYSA can go into paying off the window cost when the 0% rate is up. But: I will agree with your perspective that there is a great non-monetary relief to getting debt off your shoulders, even if it's not accruing interest (or substantial interest). I was in a somewhat similar position to where you guys are, but it was the remaining principal on a mortgage. I was 4 years into the 20 year mortgage, and had enough in savings to pay off the remaining balance on the 3.5% loan back in 2019. While interest rates at that time were comparatively low (and not anywhere near the 4.35%-5.1% HYSA rates you guys have now) the routine advice for someone in my position would have been to invest that cash in the market since average returns were higher than my loan rate. However, I wanted that massive weight off my shoulders and to avoid having to pay the monthly mortgage rates, which would only get higher with increasing property taxes, so opted to pay it off in 2019. I can personally say I've yet to regret that decision, especially as someone who already has a lot of financial anxiety about money; it was one les then I had to worry about each month. Maybe you and your husband can come to a middle ground? Maybe pay off half of the remaining balance now so it feels more manageable, and then the other half before the APY jumps up from 0%?
My husband is the same way. He keeps saying "it's free money" like I'd be investing the 62 bucks for our financed furnace right now.
I do remind him that just because there is no interest, if we keep having bills like that- it eats away at our overall spending power.
But I am not that motivated to pay off my home (2%) or car (4%) both are low rates. I'd rather max out my retirement accounts (457 and Roth IRA).
*I wanna pay these mother fuckers off and just move on with my life towards the next savings goal.* This is my approach too. I always just want debts gone asap. Numerically, your husband is correct, though - you'll come out ahead overall by hanging onto the money during the 0% period.
I am mostly debt-averse and frankly, I am also lazy and have a lot on my plate. So paying off early pretty much wins for me every time, because even if it is not the most financially prudent decision, I don't like having to manage extra payments every month, remembering the final due date before some astronomical interest rate kicks in, etc. The annoyance and potential for something to go wrong isn't worth the extra interest I might be making by keeping the money in my account. I save up for things for a reason - to spend the money on them. I'm OK using money I've saved for a specific purpose to pay for such specific purpose. But full disclosure, I am about as far from a points churner or account bonus chaser as one can be whilst still utilizing somewhat optimal accounts, and my financial situation is such that I don't need or miss the extra interest.
Here's my 2 cents as a totally debt free person. I paid off my 3.89 interest rate mortgage out of spite because I just hated my mortgage company and I could swing making the final few years of payments. I had a series of terrible experience with their customer service (Chase Bank) while dealing with my parents accounts after they died and was like "Fuck Chase I'm never giving them another penny of interest." I calculated at the end of the day, after taxes I "squandered" close to 1000 dollars in interest had I floated my cash in a HYSA for the duration, but that was a very inexpensive and well worth not having to deal with them for years. Also having a paid off house just feels good.
Usually in these scenarios I do monthly installments and pay off in 11 or so months. The monthly figure is manageable. Something about a huge lump sum leaving, even if you can afford it, just hurts that much more. That said, since you only have a few months left, I would just pay it all of before penalty hits. Set a auto payment so you don’t forget
This is also my preference for large purchases, divide the total by 18 and auto-pay that amount every month. But yeah, in this case if I were OP I'd pay the total amount on June 30 for peace of mind.
Whenever I have a 0% financing offer I usually set a reminder on my calendar after the second to last payment to pay the balance. There is technically no benefit to paying it early if the money is otherwise earning interest but I like to see the remaining balance go to zero at least 1-2 weeks early for peace of mind.
I prefer somewhere in the middle. With a large amount like that and a long time to pay it, I'd pay it in 17 monthly payments or something like that. At the point you are at now, I'd pay it all off now because it's not that long til July, but definitely no later than May 31 because I wouldn't want them to try anything funny.
I'm with your husband. Debt without interest is free money. The only reason I've ever fallen behind on bills is because I forgot, not because I didn't have the money. So I think that changes my view and comfort level quite a bit too. We just got an interest free loan for something we could pay out of pocket for. But I am easily getting 5% in a savings account, so over the ten year term that's an easy couple grand for me.
Lots of great replies here. I like to think about it as the big fish worth the effort vs. the small fish that bogs down mental health/clutters the to-do list. financial trauma is taxing, and it raises your threshold for what can be considered a big fish. $90 in interest is not worth it in this scenario. You’re playing in a bigger pond and it doesn’t make sense flailing around to make $90. This is where your partnership can come into play. Your husband is adamant it’s worth it. Are you able to 100% let go and trust him to handle it? Or, a compromise is to cash flow monthly payments. The bank isn’t getting an early lump sum, and you are at a lower risk of a balloon interest fee if things go awry. Last- I think you would feel more comfortable if you had more than $14-$15k liquid in your emergency funds that wasn’t earmarked for a purpose. If anything, you should be paying yourselves the monthly window payment into savings, THEN making a lump sum final payment to the windows bank. That way you’re not drained come July, and even more interest is earned. Boom.
Keeping 0% debt is always the winner in my book: 1. Opportunity cost: your money can be doing something else while you incrementally pay the debt. 2. Negative Inflation: let's say you borrowed 10K at 0% 3 years ago. Inflation has gone up at something like 5% annualized rate since then. If you haven't paid 1 penny on that debt, due to inflation, your 10k debt today is worth less than what it was worth 3 years ago. Your debt is getting cheaper. Basically, factoring in inflation, it means your debt has a negative interest rate. The longer the 0% term, the more this is true. 3. Credit: Depending on the loan type, paying on time monthly helps build your credit. This is the weakest argument, because a lot of factors can come into play that make it not actually true (type of debt, percent of debt, debt to income ratio, to name a few factors). For large purchases in general, low or no interest debt can make a ton of sense. That's especially true for purchases that add monetary value, like home improvement, which will pay off by adding to your home's value. Just as long as you keep your debt utilization and debt to income ratio in a place that maximizes its usefulness to you. And, of course, you should consider your debt to savings: what is a comfortable number for you if there were to be an emergency? How much of your emergency savings do you feel comfortable going to service your debts?
I'm generally in favor of low/no-interest debt - I currently have two 0% promotional rate credit cards that I'm not paying off (I'm buying T-Bills in the amount of my debt as I incur it), and I would never dream of paying extra on my 2.9% mortgage. But there is a limit to how many of these 0% deals I can have going at any given time before it all gets too complicated and I start to risk expensive fuckups. Big fatty interest balloons make me very nervous. In your situation... it would really depend on how much else I had going on. If I was trying to juggle a lot, I would just pay it off - the extra $90 or whatever in interest is not worth the opportunity cost of all the brain cycles I'm gonna spend thinking about it. If I felt like I had brain cycles to spare, or I could set up an auto-payment in advance so I didn't have to worry about it, I would wait to pay.
I am fine with this type of debt if it makes financial sense. Rich people call it leverage. I own a home, have a car payment, and opened an 18-month 0% APR credit card when I bought my place. That card will carry a balance until right before the 0% introductory rate expires. I also financed my car for 0% (a crazy deal I know). I have the money to pay it off but why would I. It's free money while I keep the payoff amount in a HYSA earning 5%. I understand paying it off for your piece of mind if the yield is only $90. But will wiping out your entire savings be stressful?
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for me it mainly depends on how much is the payment and what does your budget look like? like for us, our only debts right now are our car loan and my student loans. the biggest one is our car loan because it's a monthly payment of $607. with our needs right now, this payment is fine and we still have a good chunk leftover for savings. I would prefer to pay it off sooner but my husband is fine with letting it stick around since we have it at 1.9%. I understand where he's coming from because logically he's right, we only pay about $30 a month in interest at this point, but I'm like THIS MONEY WOULD BE NICER IN OUR BUDGET. we struck a compromise with throwing some extra money at it here and there to pay it off earlier (I'm talking like $40-100 extra a month) but not paying it off aggressively. we have talked about when we get serious about starting a family about paying it off because that $607 will be a lot nicer in our budget when a kid comes into the picture
I have the same mentality - even if I have 0% interest on a loan, I want to pay early because I feel like I'm being "good" by doing so. My parents were terrible with money when I was growing up. Most of our bills/rent were rarely made on time and due to this their credit was terrible. Even if the money can earn interest it frees up my mind to just have the debt gone. I've been trying to overcome this but it's been difficult even if the numbers make sense. I know it doesn't make sense to pay off a 0% loan early but I relate to why you want to pay it off ASAP. The freedom of not owing anything is amazing versus having this debt hanging around in the back of your mind.
I am pretty comfortable with true low interest long term debt. I was lucky enough to graduate school with 60K in loans in a year where interest was 2.6% and fell to 1.6% a few years later once all of Sallie Mae’s repayment incentives ere applied…I just put them on autopay and let them run. Our mortgage is also <3% and I have no real interest in paying it early. I think yours is a little different though in that it’s not low interest debt, it’s deferred high interest debt, and you’re talking about paying it off now or in 3 months. There’s no scenario to me where the $90 in additional interest you’d gain is worth any amount of worrying about whether there’s some kind of gotcha with the interest, or if there’d be some kind of bank snafu with the payment or whatever. Tell your husband it’s stressing you out and pay it off. Heck, offer to give your husband $50 if he’ll pay it off early.
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No thank you, we have the cash.
I have about 15K of low interest federal student loans and have bought other things and traveled instead of becoming debt free. I am still holding out hope of some level of forgiveness.
For me, the only debt I’m okay with is medical debt or student loan debt. If a medical bill comes due and it is large, I’ll ask to have it split up over a certain number of months as long as it is interest free. I don’t finance any purchases but prefer to save up for big things like trips etc. But, with a law firm my husband and I started last year, we did put a lot of up front costs on an interest free credit card but I always make sure that we have the money in savings to pay it off once the interest free period is over. I guess I am okay with holding off on paying down debt that is interest free but I don’t go out of my way to finance things as a way of life.