Who is the money whiz?

[CigarStone]

I am refinancing my cabin to get my former So off the deed and I have a couple questions I'm hoping someone can help with. I don't have a clue when it comes to how interest rates work on auto and home loans. The loan officers will give you an interest rate but that is magically different than the APR .... it's all greek to me.

So my question ..... When it's all said and done I will have a $10K - $15K cash out. After buying some cigars, is it smarter to pay down the truck loan or the cabin loan until I sell the cabin.

 

[rbbrock]

It will most likely make a bigger difference on the cabin as that's probably a much longer term, so paying it down early will avoid a lot of interest over the years.

 

[rbbrock]

These are just made up numbers to give an example, obviously.

On the left is a 25 year loan of $265,000 at 5%. On the right a 4 year loan of $50,000 at 9%. Both have an extra payment of $15,000 made in month 6. On the longer term loan, even though it's a lower rate, the interest saved is FAR more.

ETA: This assumes you will keep them both for a long time. If you are selling the cabin relatively soon, it won't make much of a difference.

 

[hydro-terp]

@JCinPA is a money guy. Not a loan guy though I think.

HT

 

[CigarStone]

It will most likely make a bigger difference on the cabin as that's probably a much longer term, so paying it down early will avoid a lot of interest over the years.

Thx. Soon I will have the interest rates on the truck and the cabin as well as the term on the cabin.

Plus I intend to sell the cabin in the next 3-4 months, once the weather breaks.

 

[rbbrock]

Thx. Soon I will have the interest rates on the truck and the cabin as well as the term on the cabin.

Plus I intend to sell the cabin in the next 3-4 months, once the weather breaks.

In that case just put it to whatever's a higher rate. If you do put it towards the cabin, you'll just get it back again when that sells, and can then put it on the truck note.

 

[CigarStone]

In that case just put it to whatever's a higher rate. If you do put it towards the cabin, you'll just get it back again when that sells, and can then put it on the truck note.

That's where I get lost. It's easy enough to compare the interest rates but what I'm not sure of is all the subtleties that affect how it's compounded and which one would net me a wiser Financial Choice?

 

[CBoukal]

These are just made up numbers to give an example, obviously.

On the left is a 25 year loan of $265,000 at 5%. On the right a 4 year loan of $50,000 at 9%. Both have an extra payment of $15,000 made in month 6. On the longer term loan, even though it's a lower rate, the interest saved is FAR more.

View attachment 103799

ETA: This assumes you will keep them both for a long time. If you are selling the cabin relatively soon, it won't make much of a difference.

hell yes, this called for a spreadsheet!!!!