140
Every $1,000 you use to pay off a 26% interest rate card saves you $260 / year.
Every $1,000 you use to pay off a 23% interest rate card saves you $230 / year.
Every $1,000 you put in a savings account earning ~0.5% interest earns you $5 / year.
Having cash on hand is good in case of emergencies, but typically if your debt is on high interest credit ...
121
This is pretty simple, and doesn’t require too much math.
First, talk of liquidity is not necessary. You are currently paying $3000 extra on your mortgage every month. (Nice!) You certainly would have no trouble whatsoever paying cash in full if that turns out to be the smartest option.
Second, it is important to note that this “12-month interest free” ...
120
Generally, there's no particular "win" to paying off the larger debt first, all things being equal. Pay largest interest rate first.
(Now, some advisors say there's a certain logic to paying off the smallest debt first when you only have a trickle of money to do it, irrelevant here -- the concept is to create an "emotional feeling of success" as soon as ...
65
If it were me, I would pay off the 23%er. That is as long as you don't borrow anymore. Please consider "your hair on fire" and get that 26%er paid off as soon as possible.
From my calculations your big CC is sitting at 26% has a balance of 20K. Holy cow girl, what in the world? The goal here is to have that paid off in less than one year. Get another ...
55
Flexible savings accounts are almost all variable interest, meaning the rates go up and down with market rates. The reason for this is that if they did not, people could pay into the fixed interest ones when rates elsewhere were low, and take money out when rates elsewhere were high (and invest it at a higher rate in other accounts), making a profit at the ...
49
If you are truly preapproved (not just prequalified) then they are required to supply you with a Good Faith Estimate within 3 days. The interest rate will appear on that document. It's subject to change until you lock it in, but there's no reason they can't provide an estimate now.
Source: Title 12 of the US Code of Federal Regulations
Except as ...
43
I'd prefer having it (more or less) fluent at any time, if possible...
And the Swiss National Bank (SNB) will do their darndest to make this a costly option. That's exactly the point of negative interest rates. They don't want to help you saving money. So you will have to choose what to give up: liquidity, or profitability.
But for now, you still have ...
34
The difference in interest is not a huge factor in your decision. It's about $2 per month.
Personally I would go ahead and knock one out since it's one less to worry about. Then I would cancel the account and cut that card up so you are not tempted to use it again.
To address the comments...
Cutting up the card is NOT the ultimate solution. The ...
32
The interest rate is the annualized interest rate you'll pay on the remaining principal balance each month. Since it's annualized, you'll divide the rate by 12, and pay 2.95%/12 = 0.24583% of the balance each month. For the first payment, your remaining principal is $250,000, and you'll pay 250,000 * 0.24583% = 614.58 in interest. The rest of the $1,180 ...
32
"AER" means "Annual Equivalent Rate". This means that if you put in £100 on January 1st, it will pay you some amount of interest each month (roughly 1/12th of 1.5%, but actually more like 1/12th of 1.49%), so that by the end of the year, your total amount of interest earned will be exactly £1.50.
With £10k invested, you will have £150 of interest earned by ...
29
Withdraw your savings as cash and stuff them into your mattress?
Less flippantly, would the fees for a safe deposit box at a bank big enough to hold CHF 250'000 be less than the negative interest rate that you'd be penalized with if you kept your money in a normal account?
28
Your understanding is indeed wrong. Bond yield is the effective interest rate relative to the current market price of the bond, and it is anything but fixed. There was never anyone actually paying or receiving 42% interest in the whole affair.
What happened is that bonds with a nominal interest rate of perhaps 10% (for simplicity's sake, and probably not ...
28
With all due respect to The David, the $1000 is best put against 20%+ debt, no sitting in checking as part of some emergency fund.
I'd agree with the decision to pay off the lower rate card. Why? Because we can do the math, and can see the cost in doing so. Low enough that other factors come in, namely, a freed up card. That card can function as the ...
27
First I must say that I'm not a Ramsey fan. Sometimes loans will make your financial situation significantly better. Especially if its a 0% loan. Generally, I do think that leveraging has its place, its the ab-use of loans what causes problems, not the use.
Re your question - you're right in trying to first build up an emergency fund. You should have enough ...
27
Because the federal government won't use the money to buy a car thus generating profits for the car company.
The aim of cheap loans is to drive sales of cars. The difference between the amount of interest paid on the loan, and the amount they could have got by investing it elsewhere, is simply a reduction in the profit.
This is true whatever the actual ...
26
The United States Federal Reserve has decided that interest rates should be low. (They think it may help the economy. The details matter little here though.) It will enforce this low rate by buying Treasury bonds at this very low interest rate. (Bonds are future money, so this means they pay a lot of money up front, for very little interest in the future. ...
25
Great question!
A Yield Curve is a plot of the yields for different maturities of debt. This can be for any debt, but the most common used when discussing yield curves is the debt of the Federal Government. The yield curve is observed by its slope.
A curve with a positive slope (up and to the right) or a steepening curve, i.e. one that's becoming more ...
25
The main reason for paying your mortgage off quickly is to reduce risk should a crisis happen. If you don't have a house payment, you have much higher cash flow every month, and your day-to-day living expenses are much lower, so if an illness or job loss happens, you'll be in a much better position to handle it.
You should have a good emergency fund in ...
25
I don't know what rates are available to you now, but yes, if you can refinance your car at a better rate with no hidden fees, you might save some money in interest.
However, there are a couple of watchouts:
Your original loan was a 6 year loan, and you have 5 years remaining. If you refinance your car with a new 6 year loan, you will be paying on your ...
23
Great question. There are several reasons; I'm going to list the few that I can think of off the top of my head right now.
First, even if institutional bank holdings in such a term account are covered by deposit insurance (this, as well as the amount covered, varies geographically), the amount covered is generally trivial when seen in the context of bank ...
22
To avoid risk from rising interest rates, get a fixed rate mortgage. For the life of the mortgage your principal and interest payments will remain the same. Keep in mind that the taxes and insurance portion of your monthly payment may still go up.
Because you own the property, the costs to maintain the property are your responsibility. If you rented this ...
21
This is "incentive financing". Simply put, the car company isn't in the business of making money by buying government bonds. They're in the business of making money by selling cars.
If you are "qualified" from a credit standpoint, and want to buy a $20k car on any given Sunday, you'll typically be offered a loan of between 6% and 9%. Let's say this loan is ...
21
This is definitely strange. I've had a number of occasions where I've contacted a bank and asked what their interest rates were on one type of loan or another, and they've always been very willing to tell me -- always with caveats that those are today's rates and they can change by the time I actually get approved, may depend on age of the car or whatever ...
19
profit has nothing to do with the level of interest rates. Is this correct?
In theory, yes. The difference that you're getting at is called net interest margin. As long as this stays constant, so does the bank's profit. According to this article:
As long as the interest rate charged on loans doesn't decline faster than the interest rate received on ...
19
What you are positioning as a loan was not a loan at all. Your father bought something to be delivered in the future. Your aunt does not want to deliver it, so she should buy it back at whatever the current market value is.
What is the price that your dad believes her share of the inheritance is currently worth? Is that based on actual appraisals and some ...
18
Applying to principal now reduces the interest through the life of the mortgage. If you have principal of 100K and 10% APY, then by the end of the year (assuming no other payments are made) you'll owe 110K.
If you have a spare 1K and apply it to interest by the end of the year you'll owe 109K, but by the end of the next year you'll owe 119.9K.
If you ...
16
1. Interest rates
What you should know is that the longer the "term" of a bond fund, the more it will be affected by interest rates. So a short-term bond fund will not be subject to large gains or losses due to rate changes, an intermediate-term bond fund will be subject to moderate gains or losses, and a long-term bond fund will be subject to the largest ...
16
The short answer is that banking is complicated, but the bank really doesn't need your money because it can get it from the Fed almost free, it can only use 90% of the money you give the bank, it can only make money on that 90% from very low-risk and thus low-return investments, and as it has to show a profit to its shareholders it will take whatever cut it ...
16
The optimal strategy of paying down the debt depends on the criteria of optimality. Oftentimes it is considered desirable to pay as little interest as possible, which coincides with paying down the most debt given the fixed cash inflow.
For this set of criteria, the strategy is really straightforward: make minimum payments on all outstanding debts, and ...
15
Because giving someone a loan and paying them to take it isn't a loan anymore.
I'll grant you, some of the treasury bill auctions did slip below 0% -- people paid in slightly more than what the bill would pay out. In as much as this was done by actual investors (and not afore-mentioned helicopter Ben Bernanke keeping the printing presses running hot all ...
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