Financial boat questions...

[aarvig]

Hey guys...wondering if there are any financial gurus out there are possibly some regular joes who could answer a financial question regarding MC ownership.
I bought a dealer demo (40 hours) 2017 XT21 last year. First year in an inboard tow sport boat. Love it. We put 65 hours on it last year.
I bought the boat for a little over 90K. Put about 35k down on it with the proceeds from the sale of a previous 100% equity owned boat.
I took a 20 year loan (for flexibility) and then have been making double payments to reduce the principle.
My question is this:
I have the cash to pay the loan off in full. I hate boat payments but I also like having cash laying around.
Is it stupid to pay these off in full ASAP or should I just continue to make double payments? I know the standard answer is going to be "depends on your situation." But what do most of y'all do? Pay or finance?

[[email protected]]

Pay it off, you’ll enjoy it more once it’s paid for. It was for me.

Having said that, you could spread it out over the next year so that you wouldn’t completely deplete your cash.

Hopefully, you have a money market fund with 3-6 months expenses already set aside.

[hunter991]

Pay it off. Toys should be paid off. And if you can't you may get tax breaks for paying it off with HELOC instead. But high interest loans for toys is a no go.

[FoggyNogginz]

if you want to look at this from a pure financial perspective then it comes down to asking what you would do with the money if you did not pay off the boat. Financially, you want to compare the interest of the loan that you're paying against any investment that you might make with the money if you kept it for yourself. This is generally referred to as an opportunity cost.

If you are simply keeping the money in your checking account, then I would go ahead and pay the boat off because you are wasting money on interest that you don't need to pay. If however, you would otherwise have that money in an investment that is producing a return higher than the interest rate of the loan, then I would continue to make payments so that you can earn interest on your money through other investments.

Psychologically this is a much different question though, because I also agree that it's nice to have things paid off instead of having payments. So the question in my mind comes down to whether or not you would rather have it paid off, or whether or not you're really looking to do the best thing with the money.

[eecyclone]

Everyone's situation is different so it depends on your loan interest rate, other investment options available, job security, age and risk tolerance.

If you literally have enough cash lying around the house to pay off the boat and have no other investment options (current or upcoming) that will return a higher rate after tax than the loan interest accruing and have not other use or need to maintain a cash balance, then you should pay off the boat.

[Wheelin98TJ]

If you can answer these 2 questions, it's easy.

What interest rate are you paying?

What can you earn with the money you would use to payoff the loan?

[88 PS190]

It depends on the financial health overall too.
If you say have a mortgage and a boat payment and a car payment and credit card debt but you also have the cash on hand to pay down the boat - then you have to look at all of those debts and their associated interest and make decisions based on everything.

If on the other hand you're the sort of guy who has maybe a very low interest mortgage, no other debt, cash on hand, and a boat with a higher interest rate on it - then it becomes a no brainer.

Unfortunately there are an awful lot of people in this world with 100K in the bank and 500K of debt and make the same statement so your mileage will vary.

[Dd24skater]

Pay it off.......would you take out a loan to have extra cash around? Look at it from the other point of view. I'm sure your answer is no on the loan. Easy decision.

[[email protected]]

Pay it off.......would you take out a loan to have extra cash around? Look at it from the other point of view. I'm sure your answer is no on the loan. Easy decision.

[emoji1303]

[bturner2]

I'm in the "you should own your toys" camp. There's no tax gain and if it's cash that's not earning investment money just sitting around, get rid of the debt.

[Huckelfin]

Just looking quickly at a loan payoff calculator (I made 7% interest assumption), it seems like you could find a happy medium between making payments and paying off completely. You could choose an option like making triple payments instead of double and youd have it paid for within 5 years. If you claim to be an average joe, being comfortable with dropping $55k to pay off a (mostly) unreasonable toy makes me think you are anything but average... Making higher payments instead will give you the option to make different investments or hold that money in case of a disaster, etc. If you're an average Joe, surely there is something else to invest $55,000 in that will yield something better than 7% (that I assumed, could be way off??). Even your IRA should do better than that.

[Shaun R]

I was in the same boat when I got mine. Had the cash to sign it over but interest rate was 2.1% so I financed a chunk of it. Come to find out that cash came in handy for house projects later that year and I am okay with the minimum amount of interest I am paying on the boat.

Pay it off if you can't come up with something else to do with the money that will make you more than the interest you will be paying.
If I was in your situation and had 50K+ cash I would refinance the boat to the lowest rate I would want to deal with and invest the rest into something else. Rental property, REIT, max out IRA, etc. Going all in and paying off the boat may feel good now, but investing in other ways will have you feeling a lot better down the road.

[kscrib]

Pay off the loan with the highest interest rate first, unless that is your primary home mortgage (that interest might be tax deductible). As long as the rate of the loan is more than you can make investing the money, pay it off.

That said, I don't like debt. I want to be in a situation that if I become unemployed that I can handle that without changing our lifestyle. I don't want to have debt that I would not be able to make payments on in case my income changed. I know I can make more money investing, but peace of mind is valuable to me.

[MC25]

20yr loans have much higher interest rates. I’d wager it’s in the 6-7% range. I’d pay it off.

[paintpollz]

Pay off the loan with the highest interest rate first, unless that is your primary home mortgage (that interest might be tax deductible). As long as the rate of the loan is more than you can make investing the money, pay it off.

That said, I don't like debt. I want to be in a situation that if I become unemployed that I can handle that without changing our lifestyle. I don't want to have debt that I would not be able to make payments on in case my income changed. I know I can make more money investing, but peace of mind is valuable to me.

This exactly.