Kubota Credit Corp Balance

[brisbine]

Nick,

Just thought I would throw in my 2 cents... KCC uses simple interest, meaning it is not compounded on a regular basis. This means that overpaying each payment may not necessarily be the best option. For example, it is fairly common to overpay on your house mortgage, as it significantly reduces the amount of interest you give them. A 150K 30 year mortgage at 6.5% has a payment of approx. $1100 per month, and at the end of the loan you would end up paying ~210k in interest. However, if you payed $1400 each month, not only would you shave 10 years off the loan, but you would only pay 100k in interest, for a savings of 110k.

Unfortunately, simple interest loans do not give us this benefit. Regardless of how much you overpay, you will still have to pay the full calculated amount of the loan, unless you pay the whole thing off early (on my loan there is no penalty for early payoff-- you may want to check yours just to be sure). So my suggestion (which is what I am doing) is to have your money work harder for you. Instead of overpaying, put the overpaid amount in an interest bearing account until you have enough to pay off the loan in one lump sum (I checked into this-- you just have to call up and have them calculate your remaining balance). You will still have the benefit of saving on some interest, only you will have made a little money in the process.

Hope this helps,

-Brian

 

[Anonymous Poster]

Some companies require you to request that additional payment be applied to the principal. The terms of the loan will be in the loan contract.

 

[kyoders]

Ohso,

There is really no "down-side" to paying cash. What you have to look at is the trade-offs:

1) If you finance now, you get to use the tractor now instead of waiting until you have the cash
2) If you finance now, you will end up paying more for the tractor due to interest
3) If you wait to pay cash, you can be earning interest/dividends/capital gains on the cash, decreasing the time it would take
4) If you pay cash, you could potentially be tying the money up in the tractor when there may have been other ways to use the money that would have brought in more than what you would have paid in interest if you had financed

Items 2-4 depend heavily on current investment conditions, and involves a lot of calculations and considerations to arrive at a true cost over time. You have to factor in things like having to pay tax on any investment income, current interest rates, potential price increases/decreases in the future, and even speculating on future interest rates. I could have paid cash for my BX, but item 1 combined with Kubota's 3.99% financing made it an easy choice for me. I have it now, and I still have cash on hand to buy implements for it!

Kevin