3 ms·

> rate was so low that I had no reason What was the rate though? If it was > 0, you lost money not accelerating the payoff.

joshuaissac 5y ago
> If it was > 0, you lost money not accelerating the payoff. Not if they could put that money somewhere else with higher expected returns than the interest rate.
refurb 5y ago
Not if inflation is >0%
Workaccount2 5y ago
...Unless that money can be used elsewhere if returns > rate.
SkyPuncher 5y ago
Everything is relative to inflation and other investment opportunities. The rate on our loan is something like 1.6% (shortly after it was literally 0%). If I can find an investment for more than 1.6%, I'm technically coming out better. Loan fees make the math fuzzier, but I'm simply demonstrating for this conversation. For example, if I can make 4% on an investment and a loan is 1.6%, that means I can still make 2.4% net interest if take the loan and use the cash to invest. The math gets even more favorable when you consider inflation. $1 in 5 years is actually cheaper to me than $1 right now.
- ryathal 5y ago
  This only works if ALL things happen. -You have the cash to buy outright. -You have an investment that you can reliably withdraw the funds from. -There isn't risk to losing principal with the investment. -The investment outpaces inflation + interest. If inflation is 3% in your example you just lost .6%. 99% of the time these things aren't true for the 5-7 years of a loan.
  - mwint 5y ago
    Does inflation really matter here? The value of the loan isn’t inflated, so I don’t think inflation should “count” here? Willing to be wrong on that, just having a hard time understanding.
    - SkyPuncher 5y ago
      I'd argue that inflation is further reducing the cost. Inflation means that $1 is fundamentally less valuable in the future than it is right now. If we're making a deal for me to pay $1 in the future, I'd prefer to make that $1 payment as far out as possible.
massysett 5y ago
Yes, it was 0.9 percent APR. I lost less than $300. I took the liquidity over the $300–having the principal in the bank was worth more to me than $300.

joshuaissac 5y ago

> If it was > 0, you lost money not accelerating the payoff. Not if they could put that money somewhere else with higher expected returns than the interest rate.

refurb 5y ago

Not if inflation is >0%

Workaccount2 5y ago

...Unless that money can be used elsewhere if returns > rate.

SkyPuncher 5y ago

Everything is relative to inflation and other investment opportunities. The rate on our loan is something like 1.6% (shortly after it was literally 0%). If I can find an investment for more than 1.6%, I'm technically coming out better. Loan fees make the math fuzzier, but I'm simply demonstrating for this conversation. For example, if I can make 4% on an investment and a loan is 1.6%, that means I can still make 2.4% net interest if take the loan and use the cash to invest. The math gets even more favorable when you consider inflation. $1 in 5 years is actually cheaper to me than $1 right now.

ryathal 5y ago
This only works if ALL things happen. -You have the cash to buy outright. -You have an investment that you can reliably withdraw the funds from. -There isn't risk to losing principal with the investment. -The investment outpaces inflation + interest. If inflation is 3% in your example you just lost .6%. 99% of the time these things aren't true for the 5-7 years of a loan.
- mwint 5y ago
  Does inflation really matter here? The value of the loan isn’t inflated, so I don’t think inflation should “count” here? Willing to be wrong on that, just having a hard time understanding.
  - SkyPuncher 5y ago
    I'd argue that inflation is further reducing the cost. Inflation means that $1 is fundamentally less valuable in the future than it is right now. If we're making a deal for me to pay $1 in the future, I'd prefer to make that $1 payment as far out as possible.

massysett 5y ago

Yes, it was 0.9 percent APR. I lost less than $300. I took the liquidity over the $300–having the principal in the bank was worth more to me than $300.