Lasttoy
Active Member
I asked credit union advisor, I decided to pop down $20k to reduce interest rate as low as they could give me. In the long run, she said , look at all the interest you saved compared to interest received on investments.
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[POLL] Do you have $10K to lend yourself?
- Thread starter insaneoctane
- Start date
Xenius
Active Member
I would be quite shocked if in a forum that still has mostly well off people who could afford to buy an S and/or an X that they wouldn't be able to lend themselves 10k. I don't consider myself near in the same class as most on this forum and 10k would be easy.
That said I have a car note worth ~54k and don't intend to pay it down faster than required because of a 1.49% apr. My savings account through an online credit union is almost making that much already. Let alone stocks/investments.
That said I have a car note worth ~54k and don't intend to pay it down faster than required because of a 1.49% apr. My savings account through an online credit union is almost making that much already. Let alone stocks/investments.
I think there might be laws limiting the sorts of things banks can do with their money. There are corporate bonds yielding around 5%, but I'm not sure banks would be allowed to invest in those. Also, technically there's risk, but in fact, if you diversify, the risk is low. With car loans there's essentially no risk because the loan is secured by the car itself, which in turn is insured against damage.
Thus lending money on a car at 3% is lower return but also lower risk than corporate bonds yielding 5%. In both cases the risk is low, but banks are supposed to be (and perhaps are required by law to be) ultra-conservative with money that the government insures through the FDIC.
That said, I am extremely averse to debt. The character Wilkins Micawber in Dickens' novel David Copperfield said that the recipe for happiness is to spend sixpence a year less than your income, and the recipe for misery is to spend sixpence a year more than your income. Most Americans seem to feel that the recipe for happiness is to spend as much money as the bank will lend you.
I know I'm arguing both sides of this: You gain 2% on your money by borrowing rather than pulling money out of good investments, but I can't help but feel that the consequences of something going wrong are worse if you are in debt.
SageBrush
REJECT Fascism
david_42
Member
Unfortunately, there are limits to how many deductions you can declare and how much you can reduce your withholding. When I was working, I always ended up getting refunds, no matter what I tried and I was getting recommendations from a tax CPA.
SageBrush
REJECT Fascism
dgpcolorado
high altitude member
Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
- Polonius, giving advice to his son. Hamlet, Act I, Scene 3
Shakespeare's wry advice aside, the world of finance has changed somewhat since 1602.
Am I really "in debt" if my assets greatly exceed liabilities? I could sell some savings bonds to pay off my car loan but I purchased them back when interest rates were much higher, I'd have to pay substantial tax on years of accumulated interest, I can never get them back since current rates are quite low, and I retain the bonds for use in an emergency (liquidity). Makes more sense to me to keep my old savings bonds until they mature and pay lower interest on a car loan. This is pretty simple stuff. For those living paycheck to paycheck the calculations might be quite different. Nevertheless, leverage has its uses.
[I have to say that I am thoroughly enjoying this thread and thank the OP for posting it!]
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cpa
Active Member
Don't fall into the trap of adjusting your withholding for both federal and your state. I am not sure how states other than California work. California has its own withholding form, the DE4. If you wish to increase your take-home pay to capture your anticipated federal tax credit by increasing your exemptions, be sure to complete a DE4 (or your state's version) simultaneously. You might wind up with a penalty from your state for underwithholding if you do not. Not all employers provide state withholding forms unless the employee specifically asks for one. The assumption is that federal = state for withholding exemptions. Makes the payroll clerk's job easier!
Then put a big reminder on your December 26, 2018, to-do list and change your 2019 federal withholding back to your 2017 withholding exemptions. This is easy to overlook, and no one likes these surprises 15 months later when they file their 2019 taxes in April 2020.
Then put a big reminder on your December 26, 2018, to-do list and change your 2019 federal withholding back to your 2017 withholding exemptions. This is easy to overlook, and no one likes these surprises 15 months later when they file their 2019 taxes in April 2020.
If you get a 72 month loan, with just the $3500 down, wait for your EV $ from the Fed & State, for example, $10k total, then pay an extra $200 a month after that, you would end the loan around the same time as a 5 year loan.
I think doing that and doing a 60 month loan with an extra 10k down are pretty similar.
The only difference I can see is the rates at 60 month and 72 month can be different.
My CU has 1.99 at 60 month and 3.19 at 72 month.
If you can find a loan with no difference, I don't see an advantage in "loaning" yourself the money at all, especially if you wanted to do a 60 month lease in the first place.
I think doing that and doing a 60 month loan with an extra 10k down are pretty similar.
The only difference I can see is the rates at 60 month and 72 month can be different.
My CU has 1.99 at 60 month and 3.19 at 72 month.
If you can find a loan with no difference, I don't see an advantage in "loaning" yourself the money at all, especially if you wanted to do a 60 month lease in the first place.
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I've personally found that the lowest rates always have a rate increase from 60 to 72 months YMMV
SageBrush
REJECT Fascism
I didn't say the regulations were adequate. In that case Congress prohibited the regulators from taking action. But there are some regulations on banks, and I think they might not be allowed to invest in corporate bonds, which was my point in reply to your question of why the banks put their money into consumer loans at 3% rather than into corporate bonds at 5%. They might not be allowed to.
The failure of Congress to allow regulators to regulate the trading of mortgage-backed securities and derivatives linked to them is an entirely different matter.
cpa
Active Member
Yep. Some employers in their new hire packet will include both forms. Some don't. And, generally, when an employee wants to change his withholding (birth of a child), they only complete the federal form. And usually that works fine for California--but not always.
wallet.dat
Member
If I lent $10K to myself, I'd never see that money again.
Glamisduner
Active Member
I guess I am financially foolish, I don't have 10k yet but that's what I plan to put down on the car when the time comes, if not more.
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