Last night I was clicking around in my AmEx app and noticed it had a credit score area. I decided to look into it and was greeted with an offer of $45,000. That is a nice bit of money to be offered and I would be crazy to say I didn’t want it, but offers deserve exploration. That is what I gave it, and a lot of thought.
If we could fully separate Lara and myself from family obligations and my stewardship of those finances then our only true monthly fixed expense is our mortgage. We have to pay our utilities and we should pay for internet and cell phone services and food. We should eat and feed the children.
Then the question became could this money give us that breathing room. The space I need to think and let systems compound. It quickly became obvious that the answer was yes. That is mostly because the APR is 7.99% no matter what term is chosen. I ended up choosing the longest term of 60 months for a couple reasons. It would have the largest true interest payment if I let the loan get to term, but I’m not going to do that. It would also be reckless if this were one big expense and then the money were gone, but this is personal breathing room to help the orbiting systems grow and produce income.
There are rules that this money can’t be used for those purposes but there is no rule that it can’t be used to replace that money and be used for personal expenses. The orbiting systems get to remain outside of our personal account and retain more of their money and invest in growth.
That means we are basically purchasing the right to use AmEx’s $45,000 to create breathing room for the effective rate of the amortized interest minus the effective inflation rate over the next five years. Since more of the interest is paid closer to the beginning of the loan origination date that means more will be paid closer to today’s value but it still decreases the overall effective payoff amount.
The optimistic outlook is this money frees up the other money to make money and we’re able to make extra principle payments each month and pay the loan off faster. In other words this is a bridge that will let other systems compound for the cost of the car payment we don’t have, and 7.99% on fixed terms is a lot better than shoving a potential future emergency on a credit card.
David Huzzard Writes 