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Pay Off Auto Loan Or Roof Repair

At the beginning of October, I made the decision to pay off my auto loan by the end of January 2018, a month before my expected due date of February 26, 2018. That way I wouldn’t have a car payment to make during my maternity leave and could free up $280 a month.

With about $5,000 left on the loan at that point in time, it would take four monthly payments of about $1,250 to pay off the loan in that time frame.

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But then the contractors working on my roof on an insurance claim put my payoff plans on hold. When they started taking off the shingles to remove the plywood damaged by an ice jam, they discovered that the plywood that was used on my roof before I bought the house was not up to code, and was too thin.

That meant they would have to replace all the plywood on the roof whether or not it was damaged, to remain compliant with town code, which was not covered by my homeowners insurance.

On top of that, the contractors also looked at my concrete side porch that is starting to crumble at the outer corner. The contractor said it’s better to fix it now before winter comes so that it doesn’t further crumble and start moving the post connected to the roof.

The out of pocket cost of the roof repair is about $3,700 and the side porch is about $1,400. In addition to my $1,000 deductible for the original insurance claim, the total comes to $6,100. While I can pay it out of pocket, I’d rather have the cash during my maternity leave since my income for that time period may be negligible.

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I called the credit union where my mortgage is, and they told me my two options are a home equity loan or a personal loan. The home equity loan would require another home appraisal, which also means closing costs, and would take a few weeks to process. Those requirements are not worth the relatively small loan of $6,100. The personal loan, on the other hand, would take a few days, and would have an interest rate around 6.75%.

So my options today are to 1) get a loan at $6,100 at 6.75% and pay off my auto loan, now at $4,700 and 1.99% interest; 2) keep the auto loan as it is and pay the $6,100 out of pocket; or 3) get a loan for $6,100 and keep the auto loan as it is.

According to the loan calculator at Bankrate.com, the monthly payment on 2 year, $6,100 loan at 6.75% is around $275, which is close to the $280 I currently pay on my auto loan. That means my monthly loan payments would be around $555, in addition to my other expenses and the mortgage.

At this point in time, I’m leaning towards a hybrid of 1 and 3, getting the $6,100 loan and making big payments on the car until my maternity leave.

I’ll then see where the auto loan is January 15, 2018, and decide on the next step then, making my regular payments of $280, continue making the big payments, or just pay off the remaining balance.

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The end of my maternity leave will land around tax time, so I might be able to apply any tax refund (if I get one), towards the auto loan, which would help too.

 

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