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LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

Debt Payoff Strategy Advice

I have two major forms of debt at the moment.

5 year Used Auto Loan $230 biweekly @ 3.25%.

15 year moveable mortgage loan $351.90 @ 5% interest (Trailer w/ Lot rental property)

The auto loan is brand new (last Monday) And my first payment is scheduled for August 9th.

The trailer is my first rental investment. Rent is $650/month (Insurance + Taxes around $400/year)

This my only debt. I don't have a mortgage and pay no rent, fortunately. I do have bills (vehicle insurance, cell phone, utilities, etc.) that average probably $700/mo.

My Question is what would be your strategy in attacking these two loans and paying them off as quickly as possible?


iknowmorethanyou
LSU Fan
Paydirt
Member since Jul 2007
5078 posts

re: Debt Payoff Strategy Advice
Send $ to your lienholder


LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

re: Debt Payoff Strategy Advice
quote:

Send $ to your lienholder


I was asking for more along the lines of which loan to attack the most first. I know the rule of thumb is the one with the most interest, but the trailer is essentially paying for itself. Should I take the extra $298.10 from the trailer and put it towards the truck, or do something else? What's the best strategy?


iknowmorethanyou
LSU Fan
Paydirt
Member since Jul 2007
5078 posts

re: Debt Payoff Strategy Advice
It seems as though your bills are FAR LESS than your income. Don't over analyze your situation. If you want to pay the car note from the excess rental income I would say good idea. Neither debt seems significant enough to say you're getting hosed on interest.

ETA: Those I know that have mobile homes as rentals tend to buy and flip some every so often or do lease to owns. That provides them with extra cash flow to pay off their rental properties.
This post was edited on 7/16 at 9:16 am


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TheDiesel
LSU Fan
Houston via Baton Rouge
Member since Feb 2010
2510 posts

re: Debt Payoff Strategy Advice
What kind of used car did you get to need a 5yr auto loan?


LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

re: Debt Payoff Strategy Advice
2011 Ford F-150 4door 4wd 20,000 miles. Excellent condition. 28k

Bought it privately and financed through my credit union
This post was edited on 7/16 at 10:12 am


LNCHBOX
LSU Fan
70001
Member since Jun 2009
27265 posts

re: Debt Payoff Strategy Advice
quote:

2011 Ford F-150 4door 4wd 20,000 miles. Excellent condition. 28k



You could have bought new at that price. Any reason you went used?


LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

re: Debt Payoff Strategy Advice
I looked at every F-150 within a 100 mile radius of BR. Both dealership and Private. With the miles it had it was by far the best price. The closest something came with the same specs and miles(4x4 4door) was like 2k. if anything was the same price it had 20-30k more miles. Didn't hurt it was already leveled with 34" tires.


LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

re: Debt Payoff Strategy Advice
Ecoboost as well..


TheDiesel
LSU Fan
Houston via Baton Rouge
Member since Feb 2010
2510 posts

re: Debt Payoff Strategy Advice
I know someone with a comparable Ford and when he put the leveling kit on with the bigger tires his mpg dropped more than it would have with a similar truck w/o ecoboost.


LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

re: Debt Payoff Strategy Advice
Also, if I were to go through a dealer, I believe they would have tried to lowball me on the trade in. Selling my old truck privately probably made me more money.


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LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

re: Debt Payoff Strategy Advice
quote:

his mpg dropped


That's usually the case with bigger tires.

I'm averaging 17 even with the tires which beats the 13.6 I was getting in my old truck (without larger tires)


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LNCHBOX
LSU Fan
70001
Member since Jun 2009
27265 posts

re: Debt Payoff Strategy Advice
quote:

I looked at every F-150 within a 100 mile radius of BR. Both dealership and Private. With the miles it had it was by far the best price. The closest something came with the same specs and miles(4x4 4door) was like 2k. if anything was the same price it had 20-30k more miles. Didn't hurt it was already leveled with 34" tires.



Should have gone to Houston, and 2k would have been worth it for 2 years newer and 20k less miles.

Make sure your truck has had the upgraded charge air cooler. It was a major issue for the Ecoboost. Should be paid for by Ford.

ETA:

quote:

Also, if I were to go through a dealer, I believe they would have tried to lowball me on the trade in. Selling my old truck privately probably made me more money.


You still could have used that money on a truck at a dealership, but I'm guessing you know that.
This post was edited on 7/16 at 1:03 pm


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MikeBRLA
LSU Fan
Baton Rouge
Member since Jun 2005
9847 posts
Online

re: Debt Payoff Strategy Advice
quote:

I know the rule of thumb is the one with the most interest, but the trailer is essentially paying for itself.


The bolded part really is irrelevant in your situation. Money is fungible.


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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
32187 posts

re: Debt Payoff Strategy Advice
quote:

what would be your strategy in attacking these two loans and paying them off as quickly as possible?


I'm not so sure that paying them down asap is the best idea. Keep in mind that a 2-3% loan is right around the cost of inflation, so that is fine so long as you have income to make the payments. At that rate you do not profit from paying off.

You have a 3.25% loan. That's pretty reasonably close to the inflation rate, no emergency here.

You have a mortgage at 5%. You can deduct that from income tax, so the real rate is more like 4% or less. Still okay.

Bottom line - don't worry about "attacking" debt that only costs a percent or so above the rate of inflation. There are better ways to use money than that.


LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

re: Debt Payoff Strategy Advice
quote:

Bottom line - don't worry about "attacking" debt that only costs a percent or so above the rate of inflation.


So are you saying to simply pay the minimum? I believe i'm going to contribute all $650 I'm getting from rent towards the trailer note while setting aside money for taxes and insurance. It's nothing out of pocket and It'll pay it off in 7 years rather than 15.
This post was edited on 7/17 at 8:28 am


eng08
LSU Fan
Member since Jan 2013
2640 posts

re: Debt Payoff Strategy Advice
Don't forget repairs, pest control, random stuff you have to fix, etc on the trailer.

It's easier to have that $200 a month always in a separate account to go to for unforeseen expenses.

That way if something goes wrong you can just take it out of that acct instead of your pocket.


LSUengineer'12
LSU Fan
The Best Side
Member since Dec 2011
1195 posts

re: Debt Payoff Strategy Advice
quote:

Don't forget repairs, pest control, random stuff you have to fix, etc on the trailer.


Without a doubt. I've been doing that since day 1 and have an account specifically for that.


GumBro Jackson
Auburn Fan
New Orleans
Member since Mar 2011
2177 posts

re: Debt Payoff Strategy Advice
Sounds like you are in good shape. If I were you I'd still put whatever extra you have toward the trailer since that is at a higher interest rate.


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kywildcatfanone
Kentucky Fan
Wildcat Country!
Member since Oct 2012
24225 posts

re: Debt Payoff Strategy Advice
I would attack the car note if it were me. If the trailer and lot are in good condition and you have a high percentage of rent time per year on it, I would get rid of the car note if it were me.


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