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307 Posts
I say liquidate the TFSA and pay off the car right away. That's a guaranteed 5.24% rate of return on your money. As you say, you can then take the amount you planned to pay for car payments and pump that back into the TFSA.
Another option to consider if you don't mind some debt, but want to change your bad debt into good debt: Pay off the car loan as above, then get another loan, such as a line of credit, and borrow the money back and invest this money in the same investments. Now your loan interest is tax deductible. Of course, to do this, you would need to invest outside of your TFSA in a non-registered account, meaning you will be paying tax on any income generated or capital gains.
Another option to consider if you don't mind some debt, but want to change your bad debt into good debt: Pay off the car loan as above, then get another loan, such as a line of credit, and borrow the money back and invest this money in the same investments. Now your loan interest is tax deductible. Of course, to do this, you would need to invest outside of your TFSA in a non-registered account, meaning you will be paying tax on any income generated or capital gains.