Advice needed

[Brian84]

Just wondering which would be the best idea.

I have a loan for a car of 33k, I also want to do some work to my house like render, 2nd driveway, paint roof, new fascia cover and gutters etc to get more equity in my house.

Would it be best to pay down the loan first which is 33k @ 14% or keep doing minimum monthly payments and do the work I want to my house.

 

[new2this]

Think this may be one of those "Only you can decide whats more important" decisions! personally i would pay the debt first (actually personally i would never have a 33k car loan...) Good luck

 

[spludgey]

Didn't you also just post a thread about buying your first IP?
The first step to any serious investing should be to get your current expenses under control, not add to them.

I also work with a girl that wants to renovate her place so that she has more equity to borrow more money for investing. I'm not entirely convinced by this strategy.

 

[wylie]

If you don't "need" a car that requires you having a loan of $33K, they why not sell the car and buy something cheaper.

Best advice to me regarding cars was "drive the cheapest car that your ego will allow".

I'd add to this advice that safety should be a bigger concern than anything. We recently were given a 12 year old car for me to drive while hubby needed our car daily, and I needed to get to my casual job. I realised that whilst this was a lovely gesture from my MIL, but car had no airbags, no safety.

The plan was that I use this car then hand it to our 18 year old son. I wasn't happy about driving with no safety features, and no way were we going to put him, just new to driving, into that vehicle

Instead, we sold it for her for $4.5K (gave her the money) and we bought a $12K Mitsubishi Lancer, 7 airbags, other safety gear.

Have you considered putting $20K in your bank by switching from that expensive car to a cheaper one that can still be safe and still have some bells and whistles? Our son is driving it and once he is earning (or learning) full time, he will take it on properly.

(Ignore this if the expensive vehicle is a must have for your job.)

 

[Brian84]

Sorry everyone the loan wasn't just for the car which I should have stated. Some of it was for our wedding as well. Probably 20k for the car.

My wife had an unsafe old excel so when we had our baby we decided we would buy a new car so that it had all the safety options and also had 6 years warranty.

What car would require you to drive an expensive car?

 

[china]

What car would require you to drive an expensive car?

Real estate agents and movie stars - any job that needs an image

 

[Scott No Mates]

Real Estate agents have been bred to believe that they need to create the impression of success by driving an expensive car - a complete fallacy! The licensee makes them take out an expensive lease to put their neck in the noose and be hungrier for selling and breaking deals. Who gives a .... what the agent drives.

 

[lizzie]

Some great advice - years ago - from John Burley, which is very relevant in your case.

The plan is to live within your means and pay every spare cent you have off your loan with the highest interest rate - whether this be a credit card or car loan - usually these rates are on depreciating items .... then when this loan is paid off apply all the payments you were making on this loan, onto your next highest interest rate loan ... and so on and so on.

I wouldn't consider a home loan a high interest rate - and they're on a (usually) appreciating asset, so I'm happy to let these remain.

But means - if you're paying, say, $700/mth on the car loan then try to pay $1,000 ... and then when the car loan is paid off apply that $1,700 to the next loan and so on.

When you consider the $33,000 loan is costing you nearly $4,500 - 5,000 yr in the interest component only ... and there is no way your car is "increasing" in value by $4-5k ... I would be getting rid of this loan asap.

I don't understand why people think they need expensive cars to be safe ... a couple of year old Corolla hatch, or new Hyundai I30 have all the safety features - and tonnes of space - for under $15k.

As for real estate agents ... I agree ... our locals drive 4wds, but that's because they're often on rural properties, and even then they're usually a Toyota or Ssangyong.

 

[CHAOS]

Hi Brian pay off the 33k but more importantly learn how to manage your finances. Having to get a loan for your wedding (as opposed to saving for 12mths for example) and also a new car indicates that your expenses are more than your income. You appear to have a buy now pay back later approach.

 

[wylie]

Would it be best to pay down the loan first which is 33k @ 14% or keep doing minimum monthly payments and do the work I want to my house.

Having read that it is not an expensive car, but other debt as well, my advice would be to roll this debt into your housing loan. People may say that means you are paying it off over 30 years, but if you keep paying what you are now on a $33K loan at 14% after you refinance it into a housing loan at 4.8%, then you will be better off (unless I am missing something).

Of course, you MUST make the payments as though you still have the loan at 14%.

 

[Angel]

Having read that it is not an expensive car, but other debt as well, my advice would be to roll this debt into your housing loan. People may say that means you are paying it off over 30 years, but if you keep paying what you are now on a $33K loan at 14% after you refinance it into a housing loan at 4.8%, then you will be better off (unless I am missing something).

Of course, you MUST make the payments as though you still have the loan at 14%.

Sounds right to me. We have always acquired any car loans through our home loan. The balance reduces back to what it was in just a few short years, because you are paying a much lower interest rate but the same repayment. We also pay some of our wages into the home loan mortgage each payday, rather than just once a month.

People really will say to you that it means repaying the car loan over 30 years, but in my experience that statement is a fallacy.

How about you not buy any IPs just yet, but concentrate instead on reducing the non-deductable debt for a few years, at least until the 33K is repaid. Keep researching of course. At that time you can reassess whether there is property close to your home that would satisfy your investing criteria. There is no good reason I can think of to buy a property if it isn't in the start of a rising market. If you wait a few years, the areas you like might be at a better place on the cycle.

 

[Brian84]

Thanks for the advice. I think I will try and pay it off quick this year.

Chaos I was saving for a house deposit of 45k, honeymoon in Tahiti of approx 15k and a wedding which was about 40k. We just fell short so had to get a loan for the rest. We had the wedding all planed so we didn't want to say we can't afford it and not get it then regret it later saying I wish we had that.

 

[CHAOS]

Hi Brian
As others have mentioned you could roll the personal loan debt into your home loan but continue to put away the same in repayments. This makes the most sense.

I understand you made commitments that you had to follow through with. These experiences provide us with learning lessons - you over committed and had to borrow funds. You are fortunately in a position where you have some equity in your home to cover this. When that is all used up, whether it be to cover personal loan, renovate PPOR or for IP deposit and costs - where is the next pool of money going to come to remedy any possible over commitment in the future? It certainly won't hurt to look over your personal budget /income/expenses.

 

[Kinnon Bell]

If you go the home loan option then get a separate split for the debt. It will be at HL rates but you can pay it off or down sooner as opposed to just lumping it into your existing home loan.

Some rough figures on P&I loan - $33k @ 14% for 7yrs vs ~6% (taking into account interest rate fluctuations over the term) for 30 years
PL - interest of ~$19k over 7 years
HL - interest of ~ $38k over 30 years

 

[balwoges]

Real Estate agents have been bred to believe that they need to create the impression of success by driving an expensive car - a complete fallacy! The licensee makes them take out an expensive lease to put their neck in the noose and be hungrier for selling and breaking deals. Who gives a .... what the agent drives.

So true

 

[aussieB]

What is wrong with the car loan ?

Brian, I have nothing to offer, but I see so many people behind Brian's car
What is the problem with a $33k car loan ? AFAIK $33k buys just about a new decent Toyota Camry. I bought one for about the same price. Wanted to put down $10k as a deposit but Toyota was running a .1% interest scheme - so decided not to put a penny down and dumped the 10k into an interest generating saving account. At 4% annually I make more in a month in interest than the interest I will pay over the term of the loan. And, that 10k is ready to be of service to me when I need it.

 

[The Y-man]

I think I will try and pay it off quick this year.

Brian,

That is seriously non-committal!

The Y-man

 

[Propertunity]

I think I will try and pay it off quick this year.

As one B Simpson said: "I can't promise I'll try, but I'll try to try".

 

[Angel]

Brian, I have nothing to offer, but I see so many people behind Brian's car
What is the problem with a $33k car loan ? AFAIK $33k buys just about a new decent Toyota Camry. I bought one for about the same price. Wanted to put down $10k as a deposit but Toyota was running a .1% interest scheme - so decided not to put a penny down and dumped the 10k into an interest generating saving account. At 4% annually I make more in a month in interest than the interest I will pay over the term of the loan. And, that 10k is ready to be of service to me when I need it.

There is nothing wrong with buying a $33K car.
In Brian's case, his car loan is at a very high interest rate and it will be affecting his serviceability for IP borrowing. That is all we are on about, moving him into a better financial position for later this year when he goes to buy his IP.

 

[nhg]

Just wondering which would be the best idea.

I have a loan for a car of 33k, I also want to do some work to my house like render, 2nd driveway, paint roof, new fascia cover and gutters etc to get more equity in my house.

Would it be best to pay down the loan first which is 33k @ 14% or keep doing minimum monthly payments and do the work I want to my house.

Question to ask, do any of the above house renovations add equity?

Not sure any of those will give you any return or anything seriously worth while even in the best case scenario.

I only really invest in bathroom / kitchen renovations for extra equity. Unless the place is a complete dump, I can't imagine some painting or new gutters isn't going to blow the valuer away.