Keep or Payoff Personal Loan

[Michael Ruvido]

Hi All -

Thanks in advance for any insight you can provide. I used part of a $187k HELOC on our primary home to pay cash for a single family in Indy. The remaining HELOC cash was used on half the rehab and I took out a $60k personal loan to cover the other half of the rehab. The personal loan is for 12 years at a 5.74% rate ($577.47 monthly payment). The Indy project is all done and I have the cash to pay off both the HELOC and the remaining balance on the personal loan ($57,500). Towards the end of this project we were able to increase the HELOC on our primary home to $318k. The HELOC rate is prime minus 0.5%, which is currently 5.0% (5.50% - 0.5%). Is it worth keeping the $57,500 for working capital instead of paying off the personal loan? Instead of having $318k at my disposal I could have $375k at my disposal.

One nice feature about my HELOC is that I can turn any part of the outstanding balance into a fixed loan with the prime minus 0.5% rate. I can do that up to five times.

If it matters, my DTI ratio with the personal loan is 36%, without it it's 29%.

We're looking to get another LTR or possibly a STR in the near future. We have a good chunk of cash already, but just thinking it can't hurt to have more and a rate of 5.74% on the personal loan isn't bad at all.

[Steven Foster Wilson]

Quote from @Michael Ruvido:

Hi All -

Thanks in advance for any insight you can provide. I used part of a $187k HELOC on our primary home to pay cash for a single family in Indy. The remaining HELOC cash was used on half the rehab and I took out a $60k personal loan to cover the other half of the rehab. The personal loan is for 12 years at a 5.74% rate ($577.47 monthly payment). The Indy project is all done and I have the cash to pay off both the HELOC and the remaining balance on the personal loan ($57,500). Towards the end of this project we were able to increase the HELOC on our primary home to $318k. The HELOC rate is prime minus 0.5%, which is currently 5.0% (5.50% - 0.5%). Is it worth keeping the $57,500 for working capital instead of paying off the personal loan? Instead of having $318k at my disposal I could have $375k at my disposal.

One nice feature about my HELOC is that I can turn any part of the outstanding balance into a fixed loan with the prime minus 0.5% rate. I can do that up to five times.

If it matters, my DTI ratio with the personal loan is 36%, without it it's 29%.

We're looking to get another LTR or possibly a STR in the near future. We have a good chunk of cash already, but just thinking it can't hurt to have more and a rate of 5.74% on the personal loan isn't bad at all.

 I agree with what @Andrew Garcia said, it depends on what you are going to do with it. If you are going to buy more properties that you can get a good return on then to go for it. I always say it is all about the numbers. What do the numbers say? If it works with the numbers then do it.