I own a car which I had bought under desperation and stupidly agreed to pay a high interest rate (8%). Recently, I used money from my line of credit, which was at 6%, to pay off my car loan. Now I want to get rid of that line of credit as soon as possible.
I put in about $200 every month to pay off the line of credit (that's what I can afford right now). I was talking to a financial advisor about this and he suggested that I use the money I contribute to my RRSP and TFSA (about $500) every month to pay off the loan faster.
I have never though about this option and I am not sure whether it is a good idea to stop putting money into my saving to pay off a loan, so I though I would reach out to the people here.
Do you think it is a good idea to stop putting money into my savings and pay off the loan instead?
I did some math (or an online calculator did):
If I just put in $200 monthly it will take me about 50 months to pay off the loan and I would pay an additional $1194.19.
But if I put in $700 monthly I can pay off the loan in about 14 month and pay only $341.15 extra.
When I look at this, the choice seems obvious, but I have no way to estimate the potential savings loss if I go for option 2 ($700/month).
I should mention that I also have shares whose value is almost equal to the amount I have to pay off, but I am really reluctant to use that because I know these shares will go up more.