Pay off loan?

[banders]

I cashed in some life insurance policies that I unfortunately contracted before I discovered this site and have a ¥10m lump sum coming. I’m 55, so 10 years at least from ‘retirement’, and I’m going to put that lump sum into the eMaxis Slim (all country) index (I won’t buy bonds - learnt from 5 years of iDeCo).

I have a 3.5% 15-year loan of ¥1.75m + ¥0.5m interest (13 years remaining) which I am tempted to pay off from the lump sum. Do you think that’s a good idea?

[runmanTX]

I will cast my vote for becoming debt free. I'd pay the loan off and then invest the leftovers. If my math is correct you'd still have 7.75 million yen, right? Any other opinions out in Forum land?

[RetireJapan]

3.5% seems like a reasonable guaranteed rate of return (by paying off the debt, you are essentially 'making' that return, which would be more like 4% if you take taxes into account), especially given the potential for stock markets to fall a lot further. I might be tempted to pay the loan off as well.

[Beaglehound]

Personally I would pay off the loan. Your investment timeframe is not massively long and paying off the loan is, as Retire Japan says, locking in ‘gain’ and a hedge against stock market performance failing to live up to the recent excellent returns.

[banders]

If my math is correct you'd still have 7.75 million yen, right? Any other opinions out in Forum land?

Duh! I missed the most important part. If I pay off early, the interest is not payable. So the o/s amount is only ¥1.56m. Even more reason to pay off, I guess! Thanks for the advice everyone.

[Tkydon]

https://www.youtube.com/watch?v=w3z0vVEVT_s