Should I use my existing savings to pay off my loan, or just continue saving?
I set aside money from each pay check into savings, and currently have enough to pay off the remainder of my auto loan, roughly $18k.
Do you think it'd be wiser to pay off the loan and then start setting aside what I had been paying towards my savings, or hold onto my existing money in case anything came up?
- JennyLv 72 years agoFavorite Answer
I would not sink my entire savings into paying off a loan. If something comes up, you may end up with a more expensive personal loan or even credit card debt. Using up all your savings can turn into a costly mistake that can take years to recover from.
Since you have been able to save up $18K, start paying extra towards your car loan instead of putting it into savings. Depending on your financial circumstances and living situation (for example if you are in the military, have zero deductibles and copays for medical expenses, and pay nothing for housing), you could consider using $3000-$6000 from your savings to pay down your loan.
- BLv 72 years ago
pay off loan will help your credit score next time you need a loan, so start paying it off, and then start an aggressive saving plan to pay yourself first off every pay day
- 2 years ago
Start paying off your loans and then continue saving after that
- PoohBearPenguinLv 72 years ago
Always prioritize paying off loans (mortgage being an exception because of the tax benefits.)
If you have multiple loans, pay off the smallest principle first then use that payment to accelerate the paydown on the next loan and so on.
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- STEVEN FLv 72 years ago
I would keep about $1000 as a minor emergency fund, and pay off as much of the loan as possible with the remainder of your savings. Then pay off the rest as rapidly as possible. Next, use the money you were paying on the loan to build your savings to at least 3 to 6 months expenses.
- Casey YLv 72 years ago
Keep some on the side, but it doesn't hurt to pay down the loan a little. Depends on the interest rate on the loan and the rate of return you could get on the cash...
- EvaLv 72 years ago
Don't empty your savings to pay off the loan. You could pay off a portion of the loan. Hopefully you're putting some of that savings into a retirement plan.
- David 14Lv 72 years ago
Pay off the loan unless it's a 0% loan.
- DroneLv 72 years ago
If you paying interest then no point save and paying interest..
- ANDRE LLv 72 years ago
What is the interest rate on your auto loan ? What does the finance contract say about paying off the loan early, in terms of being relieved of paying interest on the period of time that would no longer be a part of the loan ?
Only someone who could see your specific finance contract could answer you.
- 2 years ago
I think you should rather start paying off your loan because all that pressure you had will slowly start to go away after you start paying little by little.