i’m an e3 taking home about 730 a paycheck. my tsp contribution is 20%(475.50). i also recently purchased a car at 12% apr 72 month term for $11500. am wondering if i should prioritize paying off car first then dump into tsp or keep my tsp contribution then pay off my car. my payments are $233 and my insurance is $400(i had a gap in coverage because of bmt). i can put max $700 in a month($475 from tsp) for car payment then $400 for insurance. i would still have money left over to be living comfortably.
i guess what im asking is do i pay off the car first or keep my tsp contribution.
without tsp contribution i would take home $2000. $1100 total for car leaving me $900 for the month. put away $300 and live on $600.
i also do have the option to refinance my car aswell
please give me any insight possible
Posted by MolassesPast3781
4 Comments
Dude WHYYYYYYY?!
Can you sell this car? I assume you’re upsidown on it and it’s not even worth 11.5?
12% for 72 months is insane.
As the other commenter pointed out, that is an atrocious interest rate on the car over 72 months. Given your rank I am assuming you are young with little or no credit history?
To put it in perspective, you’ll be paying almost $4k in interest on an 11k loan, or 34 percent of the value of the loan.
The good news is with a 10k down payment you likely aren’t upside down on that loan. You can sell the car and look for something less expensive but you’ll be eating a couple thousand in immediate depreciation after the purchase, so If you are happy with the vehicle purchase, then paying that loan off as fast as possible needs to be your number one priority.
What is the cost of refinancing your car? What is the new interest rate you can get?
Either way, that 12 percent interest rate is going to cost you a lot of money. If it were me, I’d be lowering my TSP contribution temporarily to 5 or 10 percent to more aggressively pay off the loan. Ensure you read the term of the loan and verify that there is no penalty for paying it off early.
Don’t lower your TSP below 5 percent so you can still get the match though.
It sounds like you have a right financial mindset, saving 20 percent of your paycheck as an E-3 is a great start. We all make financial mistakes along the way, just do what you can to correct it now.
yes i’m 19 with only a couple months of credit history. i am happy with the car purchase. i got a lexus with the 3.5l engine which are super reliable and can keep for many years to come. i would rather keep the car and pay it off first than to sell and find another car which will not last me as long. i can get a 8% loan for 60 months and my payment would be $243 a month which is way better. i figured i can wait more to get a better offer for a loan. the tsp will not match the full 5% until i hit my 2 year mark.(got another 14 months.)so im thinking i can aggressively pay it off first then contribute but i also do not want to neglect my tsp. i get i have to sacrifice something to pay this off
i really have no monthly expenses. no phone or wifi payments. only monthly expense would be the car it’s self and insurance on the car. both add up to $635 and throw in another 80 for gas aswell. 500 i put away in my hysa and use 200 for misc costs