Thursday, January 17, 2013

Pay off car loan vs savings?

ok my car loan is $2411.00 and some change. I can put about $1500.00 on it with $1000.00 in savings. However...........I do have to pay homeowners insurance and who knows about taxes come April. So what would you do? Put down that chunk of change or make a few large payments of around $500.00 for the next few months? Once the car is paid for the ONLY item we owe is our home. I want to save at least 6 months of expenses before we tackle the house after paying off the car. This is what I will look like then!!

3 comments:

  1. It depends.....1--make sure you have enough in savings to cover any unexpected bills/taxes due in the next few months and 2--what is the interest rate on the car loan vs. the interest earned on the $ if kept for savings? No point in keeping extra $ in savings if the interest you pay on the loan is higher than the interest you earn on the savings cash.
    IE: the car loan is at 4% but the savings acct. is at 2%. Makes more sense to knock out the loan than hold extra cash in the savings acct.
    But if the car loan is at 0% and the savings acct. is at 2%, pay some on the car but keep more of the $ in savings.
    That's just MHO tho....

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  2. Bills to pay… I know where you are coming from, Lee Ann! Paying for the very my first car gave me headaches too! But soon as I moved on to my second car from a new dealer (hooray!), I was introduced to their short-term loan. Honestly, it only took me two years to finish my payment. Believe me, I was that girl on your photo singing “I’m debt freeeeee!” at that time. ;D

    Leisa Dreps

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  3. I say pay loans first. We want to get off of our debts as soon as possible since there are interest rates to consider. But of course, we should also consider putting up some savings. Making ends meet is enough work already. What more running another leg for debts, right? I clearly understand you as we are paying off a car loan as well, and I am very thankful that we get to pick a good finance company. Hope you’ll make the right decision for you and your family!

    Lucy Engle

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