3

I am having a rather confusing financial situation. A the moment, I am having around 1200 euros a month on savings. I have the emergency fund already set up. The only huge debt i have that i need to take care off is my car which I am planning to pay it off in july next year. CoVid19 situation does not hinder my job as its deemed necessary by my company and hence I will be having a steady cash flow.

I am looking for a better investment scenario , as I would like to invest this money but would need to cash out the next year to pay the debt off for car. It is possible for me to risk the loss upto 20% of my total investment. I normally follow a value investment strategy and long term holding. I am also interested in REITs but in general in order to cash out from REIT, one must do that an year advance to liquidate and hence i believe this does not suit my situation. So none of the strategies that I know are helpful here. Is there any specific investment that i can make during this year which gives me flexibility to invest my money ?

I am not really satisfied in leaving the money in the bank account doing nothing as I live in Germany and the interest on savings accounts are as low as zero and is not much helpful.

Improve this question
1
  • 5
    You can view paying off your car loan as an investment.
    – Pete B.
    Mar 26, 2020 at 12:12

2 Answers 2

Reset to default
3

If you can lose 20% and still make the balloon payment then only risk the 20%. Based on your question you can set aside 1,200 a month for the next 15 months. Since 20% of 15 months is 3 months take the next three months payments and invest it in a ETF or mutual fund. The remaining 12 months keep it safe in a bank or CD.

You can do this because you already have an emergency fund, and you believe your job is secure. If you didn't have the emergency fund you would send the extra amount there. If you were worried about your job you wouldn't want to tie up money you might need soon.

Of course if you can save interest by making the balloon payment early, I would wait until the last 3 months to invest, and make the balloon payment as soon as possible or even make a larger monthly payment.

Improve this answer
1
  • thank you, that sounds more safe to do, only invest the 20% i can owe to loose. Unfortunately as per the contract, i did not see any foreclosure and i can not do foreclosure as part of the balloon payment i intend to pay off next year is supposed to be saved in the coming months as I plan not to touch the emergency fund for any reason. Thank you
    – Sai Raghava
    Mar 26, 2020 at 12:20
2

  • For Short term stocks are very dangerous and there is a possibility to have your returns in negative.

  • For Short term only bank CDs are safer investment, as there is no chance of losing money.

Why do you delay the payment of your Car loan ? Pay the debt as early as possible. Being debt-free is one of the best feelings of human life.

UPDATE Car loan generally does not get tax subsidy as housing loan. car loan is a loan, which can be avoided in general. I would suggest you to pay off as early as possible.

Improve this answer
2
  • i have not delayed , when i bought the car this january, the contract was structured that way, so that apart from the down payment, i pay little amount every month and then one last settlement after 18 months. It was financed that way so that i can save up and pay that off. But it just looks a disappointing to keep all the money in bank for no interest while saving it up.
    – Sai Raghava
    Mar 26, 2020 at 11:30
  • I bought car loan of 3 years and paid that off in 6 months in USA. I paid less interest, as I paid off loan sooner. Negotiate with the bank about foreclosure of loan. if there are foreclosure charges, see how much they make an impact. Personally, i would be ready to lose few euros as foreclosure charges, instead of holding money. Car loan does not get government tax subsidy as well, in general.
    – Venkataraman R
    Mar 26, 2020 at 11:41

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .