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Started By
Message
Help With Solution To Pay Off Loan
Posted on 7/27/22 at 10:15 pm
Posted on 7/27/22 at 10:15 pm
Bought land at the beginning of the year that I plan to build on. $~100k for 20 years @ 6.75%. I have around $75k in the bank for down payment on the new build. Here’s what I’m thinking and where I need opinions. I owe 10k on my truck that if I sold, could get 35k from. So $25k after payoff. I could take that $25k and add to the $75k in savings and pay my land off. Then when I build just use the equity from the land as down payment. This would require me getting a new truck which I could finance through my credit union for .99%. I would never buy a $75k truck but for the sake of this scenario say I do and finance it the full 84 months. In my mind I have essentially traded a $100k 20 year loan at 6.75% for a $75k loan at .99% for 7 years. What am I missing here and why is this not a good idea?
8
Posted on 7/27/22 at 10:37 pm to GAFF
Depreciating asset.
Posted on 7/27/22 at 11:02 pm to GAFF
210 assets - 110 liabilities = 100k net worth
175 assets - 75 liabilities = 100k net worth.
You’re not increasing your net worth, you’re reducing your interest payments at the cost of your liquidity. Objectively the math works on the lower interest payments, but I’d struggle to give up my cash going into a build.
There should be other ways to speed it up. Put whatever you don’t need in cash towards that lot loan and be aggressive paying it down.
Eta maybe even pay off the truck so you can use that cash flow to help.
175 assets - 75 liabilities = 100k net worth.
You’re not increasing your net worth, you’re reducing your interest payments at the cost of your liquidity. Objectively the math works on the lower interest payments, but I’d struggle to give up my cash going into a build.
There should be other ways to speed it up. Put whatever you don’t need in cash towards that lot loan and be aggressive paying it down.
Eta maybe even pay off the truck so you can use that cash flow to help.
This post was edited on 7/27/22 at 11:04 pm
Posted on 7/27/22 at 11:08 pm to GAFF
Couldn’t you also refinance the current truck and take equity out? Then use that equity with your $75k cash to pay off the land loan
Posted on 7/28/22 at 7:05 am to GAFF
Keep your cash, keep your truck
Put every extra dollar a month you can towards the lot
Put every extra dollar a month you can towards the lot
Posted on 7/28/22 at 8:29 am to GAFF
Pay the truck off and any bad debt, then proceed with the build whenever you feel like you have the down payment you want/need.
Posted on 7/28/22 at 11:08 am to GAFF
What credit union is offering .99 auto financing on 84 months? 
Posted on 7/28/22 at 12:04 pm to BACONisMEATcandy
quote:
What credit union is offering .99 auto financing on 84 months?
great question, I dont think any, Penfed is over 6% for 84 months cuurently
I think OP was using old rates to justify new truck
Posted on 7/28/22 at 12:27 pm to GAFF
I was in similar scenario a few years ago (minus the truck payment.) I had owned the land for about 4 years before beginning the building process (55k loan for land, which I knew was a steal for 2.5 acres). Piled up as much cash as I could before building. Went in with like 35k equity in the land (through appreciation) and 50k cash. I liked having the cash on hand vs equity tied up in the land.
Posted on 7/28/22 at 3:24 pm to GAFF
This isn't about paying off a loan, this is about buying a new truck.
If you want a new truck and can afford a new truck then buy a new truck. Stop with the mental gymnastics saying how you will save money by driving a new truck.
This is like the guy buying a liter bike to save on gas.
If you want a new truck and can afford a new truck then buy a new truck. Stop with the mental gymnastics saying how you will save money by driving a new truck.
This is like the guy buying a liter bike to save on gas.
Posted on 7/28/22 at 3:39 pm to armsdealer
quote:
What credit union is offering .99 auto financing on 84 month?
quote:
great question, I dont think any, Penfed is over 6% for 84 months cuurently I think OP was using old rates to justify new truck
I work for a Fortune 500 company that offers an employee Credit Union membership as a “perk”. They actually offer 1.24% up to 96 months. (Just verified before replying)
quote:
This isn't about paying off a loan, this is about buying a new truck
No, this is very much about me paying my loan off. If I can get a new truck out of the equation great but it’s not my goal.
Like I said earlier, the sooner I can get the loan repaid the better. Thought this might be a way to do it in 7 years vs 20.
Posted on 7/28/22 at 3:47 pm to GAFF
The credit union will give you 1.25% for 8 years on a truck but won’t give you any better than 7% for 20 years on land?
ETA: would you throw the $75k on the lot loan right now and just keep the truck? If the answer to that is “no”, your alternative in the OP should be no.
ETA: would you throw the $75k on the lot loan right now and just keep the truck? If the answer to that is “no”, your alternative in the OP should be no.
This post was edited on 7/28/22 at 3:50 pm
Posted on 7/28/22 at 4:08 pm to GAFF
quote:
No, this is very much about me paying my loan off. If I can get a new truck out of the equation great but it’s not my goa
okay, if you want a new truck , buy a new truck, you dont need anybodies permission or grace to do so, but if your goal is to pay off the lot as quickly as possible you do not do that by adding more debt, if you are not worried about having cash reserve then apply the 75K to the lot and pay the remainder off as fast as possible with every extra dollar you can......this would not be my attack but if that is your goal that is the quickest way to get there
Posted on 7/28/22 at 4:17 pm to slackster
quote:
The credit union will give you 1.25% for 8 years on a truck but won’t give you any better than 7% for 20 years on land?
Credit Union wouldn’t finance raw land.
quote:
would you throw the $75k on the lot loan right now and just keep the truck? If the answer to that is “no”, your alternative in the OP should be no.
Good way of looking at it. Thanks.
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