Comments on: Reader Question: Should I Pay Off My Car Loan Early?

By: illini

illini — Sat, 24 Oct 2009 03:17:09 +0000

Alexa,

Since the car depreciates even if you own it out right, it doesn’t really change the math. Paying off the car is going to save you money. The decision really is if you’re comfortable with less cash in the bank.

By: Alexa

Alexa — Fri, 09 Oct 2009 19:09:32 +0000

Hey all,

I checked out this site because I too am now able to pay off my car loan but wasn’t sure if it was the smarter thing.

My simple logic on the matter was: a car is NOT a “positive” investment…meaning, it only depreciates over time. It’s one thing to pay interest into a home loan (though these days homes aren’t necessarily appreciating, yikes) or art, or other investments that appreciate over time. But to continue to pay interest on something that will only lose value as the clock ticks?

Is that something to consider? Pay off the loan, and instead use the money I would be paying toward the car each month to save and invest in something “positive” later…

By: Caleb

Caleb — Wed, 30 Sep 2009 15:15:48 +0000

With the economy in the condition that it is in I would hold on to my cash. You never know about employment. At this date and time just continue to make your payments and pay more towards your principal to reduce the amount that you would pay on interest.

By: atl

atl — Fri, 21 Aug 2009 16:59:38 +0000

ppd: you are in trouble, pay off the loan and dont buy american cars. I had the same issue with a cobalt. I lost about 10K in 2 years.
aaron: you should keep with that loan. it has to be short money and it will help your credit as long as you pay, just make it an automatic payment and keep the account funded.

By: Aaron

Aaron — Sat, 04 Jul 2009 20:30:11 +0000

I have a question. I'm in a situation similar to Thomas. I have a car loan at 6%, with a remaining balance of $2,500, and 20 months left of a 36 month loan. I have over $5,000 in savings, but I have a very short credit history, and I know that the length of credit history is a major component in my score. Therefore, I came up with the following plan, and I'd like to hear you guys' advice on whether or not it sounds like a good idea.

I pay the bulk of the balance off, leaving a small balance ($300-$500), and I pay that down over the remaining 20 months left on the loan. That way, I cut a huge chunk of the balance off, don't incur nearly as much interest expense, but still retain the loan for the full 36 months, therefore improving my credit score. Does this sound like a winner, or are there probably minimum payments I'd be required to make on the loan?

By: PPD

PPD — Mon, 08 Jun 2009 19:10:50 +0000

I need some urgent help!!
I am desperate for a solution for my problem.
I owe $14400 on my car (85,000 miles) and it is worth $6000. I have about $7000 that I could take out my savings to do one of these two things: pay that $7000 towards my current loan and keep up with payments and keep this car untill it doesn`t work anymore , or trade my car in for $6000, get a newer car for $12500 (13,000 milage), transfer whatever is left from my current loan to this new loan?
Please advise me!
I appreciate it!

By: DYP

DYP — Mon, 23 Mar 2009 03:19:42 +0000

Ok, so what’s the concensus? I’ve got the same situation as Thomas…Loan balance to payoff my car is $55k. But I’d rather keep the cash & invest it. My loan is 5.6% & the payoff is 2011. One financial analyst said not to pay it off…but to hold onto the cash. The insurance company’s payout will be based on the value of the car…irrespective of if it has a loan or not.

By: Hangman

Hangman — Thu, 19 Mar 2009 20:43:30 +0000

To desh perdesh who said :

“I think everyone is overlooking one fact.

Loan is better insurance against car that is totaled.

If you pay for the car in full, your insurance company will give you almost nothing if car is totaled.

If you still have a loan, insurance company settles with loan company and you get a new car.

In America, simple maths does not count. What it takes is getting factual information from big rackets.”

You are mistaken. Insurance will pay you what the current value of your car is irrespect of how much you owe or if you have a loan on it or not. If your car is worth less than what you owe, then it is your responsibility to pay the difference to the loan company. The insurance company wil lonly pay the loan company the value of the car, not the value of the loan. Thats your responsibility. The only way out of this is if you purhcase addtional GAP insurnce which covers the difference.

By: kcd

kcd — Sat, 14 Feb 2009 05:51:00 +0000

I’m in the same boat – have about $6k left on a 2008 Honda Odyssey. Loan is at 5.7% – paying it early for the mental well being and were else am I gonna get a 5.7% return?

By: John D.

John D. — Wed, 11 Feb 2009 02:37:18 +0000

If you choose the early pay off option.. How does that effect your credit? I’ve heard it’s better (credit wise) to go with the full term.