Should I pay off my car loan quicker?
I got a new 2018 Honda Civic EX-T when I graduated ~2 yrs ago. I have 15.5k left on the loan with 41 months remaining at 3.29% interest. I started out with horrible APR as I had no driving history and shopped around a few months in to switch to a lower rate and settled at 3.29. Shopped again recently and this is the best rate I'm currently getting. I don't have any other debt, and don't forsee any major expenses over the next 2 years. Should I increase my monthly payments (currently $420 with $375 towards principal) to get done with the loan quicker? I'm paying close to $600 / year in interest; it's not horrible but now that I switched jobs and have more than double the cash flow (will start saving around $9k/month starting this month) I'm wondering if it makes sense to pay it off quicker. Apart from emergency funds, most of my NW ($115k) is invested in S&P500 and Tech Index funds with 15%+ return so far this year. TC: 230k YOE: 2.5
If the interest rate is lower than the S&P 500 average it’s always better to invest it. The people who always tell others to pay off debt first just are irrationally scared of debt.
I have a similar 3.2% apr on my car but I’m just leaving it. The money is better spent in the market
If you are saving 9k a month. It would take < 2 months to pay off 15k. Definitely would pay it off. Your net cash flow (or savings rate) would increase by 600$/mo from 3rd month onwards.
I had the same question for my new car loan on blind last month. I chose to spend in market and gained more than 150% in one month
You are making enough money where you could pay it off completely or continue paying the monthly and it won’t impact your long term financial situation. 15k is a very small percentage of your TC and you will be completely fine regardless
I recently refinanced my auto loan from sfcu at 1.49%
Invest the same money on some stock your return will be much higher.
In my opinion It doesn’t make sense to pay if off based on your interest rate. Better off continuing to invest your extra money if you think your growth rate will be more than 4% a year.