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Discussion Starter #1
Hi guys,

I have a new car loan of $12, 000 with Annual Percentage Rate of 1.9%. I also have $20, 000 in cash. So, I am wondering what to do with it.

I was just talking to a rep with ING Direct and they told me to put it in for 12 month GIC with 2% interest rate of return.

She also said, "Your accounts at Ally are eligible for Canada Deposit Insurance Corporation (CDIC) coverage of up to $100,000 per depositor. Ally is a product of ResMor Trust Company, which is a member of the CDIC."


Here are my questions:

1- Is it safe to go with ING Direct/Ally/ResMor Trust Company? I don't see Ally or ING Direct on list of CDIC (http://www.cdic.ca/e/insuredWhere/members.html#ii)

2- Is there any other place I can invest and get a higher return than 2%? Like credit unions? I have never dealt with any other instituations than CIBC, TD, Scotia so any detailed info on this question would be really great help to me.

3- 90% chance I may not need the $20, 000 at any time during 1 year or even 2 years. But in case I do need it what would be the best way to go.

4- I know I shouldn't be asking this but still, should I pay my new car loan first or invest the money? I have 1.9% for the car and ING pays 2% for the year so most likely don't pay for the car?

Thanks in advance
 

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Is your car loan on a credit line?

You should pay that off as soon as possible if it is and then use that credit line if you need it.

If it's not a credit line, you should at least consider that 2% of interest will be taxed at your marginal tax rate so it's not really 2%.

Also, if you need the money within 1 or 2 years, the best idea is to put in one of these investment savings accounts just like you're considering. You don't want to lose any of it and you don't want to be forced to sell any stocks/bonds that you buy at the wrong time.
 

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Easy. Pay off the car loan. You make 2% after tax, risk free. A GIC would only make you ~1.2-1.4% after tax (for 30-40% tax rate).
 

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Discussion Starter #6
P.S. The car is financed by Honda. It was a new car and term of the finance is 6 years. So, I don't know if the taxes you talk about still applies.
 

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How far into the Honda Canada loan are you? Like a mortgage, Honda financing collects all of the interest in the first few years. If you have already been paying the car loan for 2 years then the cost of borrowing has been mostly paid for and you may as well continue the payments.

If you just bought the car then pay it off. There is little else more satisfying in this world than paying off dept early!!
 

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Discussion Starter #9
Thanks for the tips.

I guess I will pay the car as it just entered it's second year.

However, I have more cash left over that I can invest. Again, where should I invest it so it's available when needed and pays more than 2%. Is there anything or the GICs or TFSA are my best bet? (Even they are paid 2% at the HIGHEST with ING Bank; other banks around 1%)

Thanks
 
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