5 Responses

1. Randy Hunt

   February 6th, 2008 at 10:33 am

   1

   The comparison is only fair if you would be making the monthly payments out of that same savings account. Assuming that was the case, your options would be (n-540)+(.04n*12) versus (n-500)+(.04(n-500)*12)… or to simplify it even further, you’re basically trying to figure out if the interest on $540 over one year would equate to $40. I think the answer is going to be no, and I would say you’re better served by paying the lump sum and saving the $40.

   However, that was assuming that you’re paying your bills out of the savings account. Odds are that you’re not. Therefore, my feeling is this:

   You’re probably not earning anything on the money in the checking account from which you pay your bills. So now you’re talking about the difference between making a monthly payment from your bill paying account, versus pulling interest-earning money out of savings. You’re unlikely (most people are) to replace that earning power diligently, so in this case, I’m against doing it, because it’s never a good fiscal choice to reduce your assets for the purpose of increasing a liability.

   To be honest, I think the amount of money being worried over is far too small to be worth the effort, but it’s a nice exercise in financial planning.

2. Odnal

   February 6th, 2008 at 12:02 pm

   2

   By paying monthly, you would earn about $10 over the course of the year (remember to reduce your amount in savings by $44.95 each month). So by prepaying, you are saving about $35.00. As long as you have the money handy, it makes sense to me.

3. tlange

   February 6th, 2008 at 6:53 pm

   3

   This is a good deal, take it!

4. Christopher Smith

   February 8th, 2008 at 5:26 am

   4

   Also, keep in mind that unless you manage to somehow deduct your TV, the money you save by prepaying is after-tax money. If you put that money in a savings account, you have to turn around and take a 25-33% hit on the interest you got.

5. Kiran

   February 8th, 2008 at 2:20 pm

   5

   You are getting an after tax return of over 8% . A fixed return. Your pre tax return is going to be less than 4% in most on-line savings (ING, etc.) over the course of that time. If its no hardship today, do it.

   Employing your capital to get 4% (savings account) is worse than 8%, all you sacrifice is the liquidity.

   Its really just a great Certificate of Deposit, that happens to throw off Dish Network as interest.