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Pay off or not to pay off?
Old 03-13-2017, 04:13 AM   #1
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Pay off or not to pay off?

Pay of loan or stay invested?
I would like some opinions please. I have $30,000 in a Credit Union loan and a credit card balance. Approximately, $15,000 in each. I also have $30,000 in various stocks in a taxable Vanguard Brokerage account. Would is be wise to sell the stocks in the taxable account and pay off the loan and credit card bill.
Or…should I just pay extra and pay this debt off the old fashion way through extra weekly and monthly payments. If I chose this option I could easily have this debt payed off by December.

Thank you...
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Old 03-13-2017, 06:25 AM   #2
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If you can pay off the debt by making payments through December, I would go for that. If you sell the stocks, you then may or may not lose potential gains, but will definitely have an emotionally hard decision on how to buy back in.
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Old 03-13-2017, 07:33 AM   #3
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What are the interest rates on the loans? -ERD50
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Old 03-13-2017, 08:33 AM   #4
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6.75% on the CU loan and 10.65% on CC balance.
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Old 03-13-2017, 09:28 AM   #5
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What is the tax hit if you sell the stocks? What is the remaining term of the loans given your current payment plans?

If the tax bite isn't too much I would sell the stock, pay off the loans and then use the cash flow that would have been used to make loan payments to replenish the stocks over time. Hard to be beat a guaranteed 8.5% return from here given the recent run in stocks... but you never know.
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Old 03-13-2017, 09:36 AM   #6
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6.75% on the CU loan and 10.65% on CC balance.
Who'd pass up a guaranteed 6.75% and 10.65%?......personal finance 101......pay off high interest debt.
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Old 03-13-2017, 09:40 AM   #7
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Keep the investments. Pay off the debt the old fashioned way (extra payments toward CC first, then the credit union loan) and be sure not to charge anything at all new on that card in the meantime as those purchases too will incur 10.65% interest until the card has a zero balance. I vote this because you'll be so sick of making these payments that it might cure you of carrying a balance in the future. Think of how much of that balance is interest at this point--you probably paid the actual cost of the items charged long ago. But seriously, kudos to you for addressing this before it really gets out of hand.
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Old 03-13-2017, 09:51 AM   #8
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Is the $30,000 your "rainy day fund" ? If so, pay off with increased payments (concentrating on the cc debt first). If not, pay off the whole debt now.

Or maybe go half way -take $15,000 pay off the 10.65% cc loan now.
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Old 03-13-2017, 10:26 AM   #9
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Normally I'm in the payoff camp... but in your case I think I'd super accellerate the extra payments to pay it off quickly by December.

FWIW - I did extra payments on my mortgage till it was small enough to lump sum without an issue... Those extra payments were painful but have burned into my soul that I don't like recurring payments. I now pay off everything in full every month.
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Old 03-13-2017, 10:29 AM   #10
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Quote:
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Who'd pass up a guaranteed 6.75% and 10.65%?......personal finance 101......pay off high interest debt.
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Old 03-13-2017, 10:31 AM   #11
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I really don’t know what the tax hit would be for sure but don’t think it would be to awfully bad.
November 2018 the CU loan will be paid off with normal payments.
No, it’s not a rainy day fund. It’s what I invest in because I max out my 401K and Roth. I have approx. $730,000 including the Vanguard tax account. I’ll be 58 in 4 months and want to retire no later than 59 ˝ (depending on what Med Insurance will be by then) with a pension then SS at 62.
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Old 03-13-2017, 10:40 AM   #12
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Your brokerage should be able to tell you what the gain of loss would be if you sold. If with those gains your 2017 taxable income will be in the 15% tax bracket (or lower) then the capital gains rate is 0% (tax-free)... otherwise 15% unless your income is really high.
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Old 03-13-2017, 11:13 AM   #13
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I would pay them off. But do you have any money for emergency.
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Old 03-13-2017, 12:04 PM   #14
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Would it work to pull a loan against your 401K? <Ducks for cover> If you have been contributing heavily to the 401K, and if your plan allows it, this may make sense. A 401K loan might be a way to avoid a capital gains sale in a taxable account.
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Old 03-13-2017, 04:02 PM   #15
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No I have no money for an emergency fund. On more thought, I'm leaning towards just paying it off. I can put $1000 week into the debt starting with the CC first.

Thanks everyone!
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Old 03-13-2017, 04:34 PM   #16
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You might want to watch out for the invitations in the mail for zero percent interest rate for short term temporarily, the caveat is that they have 3% fee.
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Old 03-13-2017, 06:28 PM   #17
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I would pay off loans first. Your investment return may or may not give you growth of needed level while loan interest you must to pay.
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