Pay off ZERO interest debt? Or let it slide 'til the due date?
I'm sorry if this type of question has already been answered. I've used YNAB4 for many years, but just started New YNAB, and haven't really figured out how to best search the forum.
We bought 2 windows and used the zero interest for 18 months that the contractor offered. We have the money to pay it off, but I'm thinking it may be better to let it slide until the due date.
We owe $1689 more, and it's due 1/2021. They'll charge interest all the way back to the beginning if we don't pay it off by Jan, 2021. We used YNAB goal feature and are paying it off at $178/month so it's paid before the due date.
We get 2.22% interest on our checking account. Because of this, I'm leaning toward just paying monthly and getting the interest vs. having the $178/month more to budget. Isn't that the most benefit financially? We're not strapped for that extra $178/mo to budget.
Keep paying monthly, or just pay it off now?
The total debt we have is:
- this Window 0% credit until 2021 - $1689 total left
- a 401k loan (about $21k left) that can't be pre-paid incrementally. It can only be paid early off in total. I have $278 deducted each paycheck to pay this off. Scheduled payoff is 4/2023.
- Home mortgage (about $159k), which we pay $825 every 2 weeks, when I get paid.
We could use 2 newer/used vehicles sometime soon, but have nothing saved for them.
Hi BMW Fan !
I'm in a similar boat and I'm opting to wait. We had a new fence and deck added to our home and were approved for 0% and no payment financing for 12 months. We had originally planned to pay upfront but given the option we agreed to finance. The funds are sitting in our budget, so it will be paid off before the due date, but it's sitting in our account earning 4% interest until then. :)
BMW Fan said:
I'm leaning toward just paying monthly and getting the interest vs. having the $178/month more to budget
I would suggest that you budget the $178/mo, assuming that accumulates enough to pay off the entire balance on or before the 0% promotion end date. However, whether you actually send them $178 per month is a different question. Since it's interest-free, I would only send them the minimum acceptable payment while you hold on to the rest until the final payment.
Set a Spend By date of $1689 / Jan 2021 (assuming you will budget to the category in January before you pay, otherwise use Dec 2020).
The quoted part I bolded doesn't make sense to me. You won't have $178/month more to budget, because that much has to go to the Window/Debt category.
I'm aware of the issues with 401k loans. I've been with the company 21 years and this is the 3rd 401k loan I've had. I'm hoping it's the last -because I should be saving for purchases, not paying for them off after-the-fact.
I'm only a 2-month user of the new YNAB. The MISC/Emergency category is a catch-all for getting ahead the goal of a 6-month buffer. With YNAB4, I was budgeting into the future. I'm not sure I'm able to use this version the same way. I can only go 1 month into the future to budget with the new YNAB. This seems wrong. So the only thing I though of to get around this and work towards a 6-month buffer, was to make this MISC/Emergency category to use for future budgeting.
A very financially savvy friend once told me don't give anybody any more money than absolutely necessary if it's not costing you anything.
It's not costing you anything on that borrowed money. It'll earn you a fraction of interest sitting in your account. Just keep paying monthly, and have a fund there in case there is an emergency, or you feel you need to pay it off for strategic credit reasons. Otherwise let it ride.