Payoff Car Loan?

[rembrandt]

I have $10,000 left on a 6 year car loan at 7%(2016 Elantra), and $50,000 in an Ally savings account. I have a job and $25000 a year in passive income coming in. Do you think I should payoff the car loan from my savings account? Thanks.

 

[jesa]

I have $10,000 left on a 6 year car loan at 7%(2016 Elantra), and $50,000 in an Ally savings account. I have a job and $25000 a year in passive income coming in. Do you think I should payoff the car loan from my savings account? Thanks.

Yes

 

[Tiger8693]

I have $10,000 left on a 6 year car loan at 7%

7%? Good grief! Yes, pay that off. Or refinance at a regional bank for 2.5% or less if you want.

 

[Dtail]

At a 7% rate, then yes.

 

[Aerides]

it's normally a financial no brainer, but with limited financial details I'd first ask:

Is your job secure from covid-impacts?
If you pay it off and lose your job, do you have savings for 6 months expenses?

If yes to both - pay it off

 

[jollystomper]

7%? Good grief! Yes, pay that off. Or refinance at a regional bank for 2.5% or less if you want.

+1

 

[Red Badger]

You took a 7% auto loan in 2016?! Was tequila involved?

Seriously, pay off that loan.

 

[ivinsfan]

Would you mind sharing why you even have this loan? What's your thinking that you haven't paid it off long ago or pay cash for that car..

I feel you must have an unusual story that you are in this circumstance.

 

[Rianne]

I would pay off a 3% loan. Actually, we don't believe in paying interest period. The only loan we'd take is a 0% loan. The only way they can get you is if you don't pay on time.

 

[target2019]

I have $10,000 left on a 6 year car loan at 7%(2016 Elantra), and $50,000 in an Ally savings account. I have a job and $25000 a year in passive income coming in. Do you think I should payoff the car loan from my savings account? Thanks.

Since you have passive income it's probably ok to use $10K of your savings to pay off that expensive loan. You'll be left with 40K to tide you over if the job goes away.

If the job is on thin ice, might make sense to wait a while. Otherwise, pay off.

 

[CRLLS]

I have $10,000 left on a 6 year car loan at 7%(2016 Elantra), and $50,000 in an Ally savings account. I have a job and $25000 a year in passive income coming in. Do you think I should payoff the car loan from my savings account? Thanks.

You essentially have 2 years of passive income in your bank account. It would seem like a no brainer to pay off the loan. HOWEVER, lacking any other info it is difficult to suggest that. For instance, what are your current expenses? What are your other debts? Age? Retirement plans? spouse? kids? One cannot make an informed decision without knowing the overall plan. Rhetorical questions as far as I am concerned. I have no interest in giving specific advice.

Historically, having that money in the market instead of the bank would seem to be a wash with paying off the loan. That has it's own risks too.

 

[Tiger8693]

I would pay off a 3% loan. Actually, we don't believe in paying interest period. The only loan we'd take is a 0% loan. The only way they can get you is if you don't pay on time.

We prefer having the safety of cash in hand, if needed. The small amount of interest is like "insurance" to us. Everyone has their own opinion.

 

[OldShooter]

Pay it off and resolve to never again buy a car that you can't pay cash for. In addition to saving you interest expense this policy will probably push you into cars where you will not get killed with depreciation expense.

 

[rembrandt]

I just paid it off. I feel alot better now. Thanks for the advice!

 

[Perryinva]

^A lot of unsolicited and not necessarily true advice. ^. As others said, yes, 7% is high for a car loan, especially 6 years. I had intentional maxed car loans at .9 & 1.9% so while my HY account was paying 2.9%, made sense to keep them. When it went down to 1.9%, I paid off the loans, though the .9 only had $3k left on it. Financing never ever entered in to the equation on any aspect of the cars I decided on, EXCEPT in order to secure an additional credit, as both were offered with a $500 credit on the purchase if I financed through the auto makers credit. $500 credit, plus make 1% on the money for nothing? No brainer.

 

[OldShooter]

... Financing never ever entered in to the equation on any aspect of the cars I decided on, EXCEPT in order to secure an additional credit, as both were offered with a $500 credit on the purchase if I financed through the auto makers credit. $500 credit, ... No brainer.

Yup. I have had exactly two car loans. One right out of graduate school when I was young and stupid. I really hated that thing. Then one maybe 40 years later where Mazda offered me $2500 to finance an RX-8 with them. As you say, no brainer. I took the loan, waited for the title paperwork to get through the state bureaucracy, a couple of months. then I paid it off.

 

[Dtail]

I just paid it off. I feel alot better now. Thanks for the advice!

Good going. Another ER Forum success.

 

[MarieIG]

I see you paid it off. Congrats! I would also have said yes.

 

[pb4uski]

.... As you say, no brainer. I took the loan, waited for the title paperwork to get through the state bureaucracy, a couple of months. then I paid it off.

I've done that a few times.... got a nice credit at closing for financing... make a couple months of payments and then paid it off.

 

[OldShooter]

I've done that a few times.... got a nice credit at closing for financing... make a couple months of payments and then paid it off.

One thing I was told by the delaer F&I guy was that it is best to wait until the title issues and is mailed to you. If the lender tries to release a lien on a title that is still working its way through the system, things can get screwed up. So like @pb4, I also made a couple of months' payments while waiting for the title. So that's a caution for anyone else who runs across this kind of opportunity.

 

[rk911]

I have $10,000 left on a 6 year car loan at 7%(2016 Elantra), and $50,000 in an Ally savings account. I have a job and $25000 a year in passive income coming in. Do you think I should payoff the car loan from my savings account? Thanks.

yes. with no debt all things become possible.

 

[mrfeh]

7%? Good grief! Yes, pay that off. Or refinance at a regional bank for 2.5% or less if you want.

+1

And never take a car loan longer than 36 months ever again.

 

[Tiger8693]

Pay it off and resolve to never again buy a car that you can't pay cash for.

That's just not possible for everyone, unfortunately.

 

[mrfeh]

That's just not possible for everyone, unfortunately.

It should be for anybody over the age of 30, if they have a handle on their finances.

 

[pb4uski]

It should be but it isn't always the best choice... especially if the manufactuer offers you 0%-2% money.