4 ms·

3% doesn't seem much higher than the annual rate of inflation. http://www.inflation.eu/inflation-rates/united-states/historic-inflation/cpi-inflation-united-st

• bane 13y ago
  Interest rates on 30 year non-jumbo loans for a while were under 3%. I think they're edging up to 5% now. If your debt is at the rate of inflation it's basically free debt so it basically just becomes a time-value of money exercise. It's cheaper to pay off your debt now then in the future.
  • SubuSS 13y ago
    Can you explain that a bit more? How is it better off to pay your debt if it is 'free debt'? Wouldn't it be better to keep/invest the money elsewhere and pay the bare minimum? This assumes elsewhere provides returns that beat inflation. I hear a lot about >3% return opportunities in index funds etc.
    • bane 13y ago
      Correct, it's better to invest the money elsewhere if you are servicing "free debt" and you can gain more money than you lose to the debt. Don't just compare raw percentages, but compare the actual dollar value difference.