Pay off Auto Loan or Continue Making Payments?

[The Critic]

The Ram in my signature is currently financed at 2.65% with $600/mo payments.

I owe $18K on the truck.

I can pay off the balance without any issues, but with the current inflation, it seems like making payments at a 2.65% interest rate is the better deal.

Thoughts?

 

[thunderfog]

Totally agree with your rationale. Keep making payments.

 

[CharlesInCharge]

If you have a stable or increasing income and fixed loan interest rate (in an increasing interest rate period with high inflation), repaying a fixed loan of yesterdays high dollars, with tomorrows less expensive dollars, is the smarter play.

Think of it in the extreme. It would be very easy and favorable to repay a 1960s $40,000 San Diego beach house loan today in 2022. Or similarly, repay that $4,000 1970 Ford Mustang loan today in 2022....

 

[ekrampitzjr]

If you have a LOT of money in the bank so that paying off the truck note wouldn't put a real dent in your savings, sure, pay it off.

If you don't have much more in cash than the $18K you owed, then keep making the payments. If you're in that boat like most people, then the day after you use all your cash to get rid of the debt, something will come up and you could have used that cash for something else—except it's gone.

 

[Lubener]

The Ram in my signature is currently financed at 2.65% with $600/mo payments.

I owe $18K on the truck.

I can pay off the balance without any issues, but with the current inflation, it seems like making payments at a 2.65% interest rate is the better deal.

Thoughts?

If you believe you can make better than 2.65% ROI with the $18k, pay it off.

 

[Slick3914]

Make the payment and invest the cash you were going to use to pay it off

 

[Zee09]

I see no benefit in paying it off unless you were going to flip it or trade it in because that makes it easier and keeps the dealership from twisting up figures to nail you.

The only other reason is that it wouldn't hurt your finances in the least to pay it off.

If you have other things like credit card debt at high interest rates and that would be a better thing to address before this low interest loan.

 

[Oey12]

If you can pay it off without issue then I honestly see no reason not to…

It’s one thing if you don’t have the money but paying interest no matter how small is never a good thing per se. Yes there are times in life it’s necessary but really should be avoided. There’s zero return on interest payments. And once your truck is paid off their are bonds/cash investments that are earning 3 to 4 percent.

 

[Spyderman24_7]

If you have a LOT of money in the bank so that paying off the truck note wouldn't put a real dent in your savings, sure, pay it off.

If you don't have much more in cash than the $18K you owed, then keep making the payments. If you're in that boat like most people, then the day after you use all your cash to get rid of the debt, something will come up and you could have used that cash for something else—except it's gone.

THAT is the truth as it seems when one thing is caught up and you breathe a sigh of relief another issue or two pops up in daily life requiring yet more spending/planning...

 

[supton]

I’d keep the loan for now, but the question then becomes, what are you doing with the money you aren’t sinking into the loan? how will it be making more money?

 

[hrv]

If you can pay it off safely...DO IT ...Less debt...better life...

 

[BigCahuna]

About the only reason I can think of to keep the loan going is, if your looking to bump up your credit score a little bit. Paying a loan off early does nothing to show a creditor how you deal with long term payments. But if your number is where you want it, and you have the $$$, and it won't wipe out your account, pay it off.,,,

 

[tbm5690]

About the only reason I can think of to keep the loan going is, if your looking to bump up your credit score a little bit. Paying a loan off early does nothing to show a creditor how you deal with long term payments. But if your number is where you want it, and you have the $$$, and it won't wipe out your account, pay it off.,,,

In my experience how rapidly you pay off a loan has no effect on score... if your payments are on time I've noticed the opposite where early payoff has boosted my score and not because it was too high of a debt to credit ratio.

 

[billt460]

I have never believed that paying ANY interest on a depreciating asset is a good idea from a financial standpoint. $600.00 @ month just to drive a car is ridiculous.

 

[Schandyman]

The Ram in my signature is currently financed at 2.65% with $600/mo payments.

I owe $18K on the truck.

I can pay off the balance without any issues, but with the current inflation, it seems like making payments at a 2.65% interest rate is the better deal.

Thoughts?

Yup keep your money in the bank. Sometimes the old OPM is best. Other people's money ie the bank. 18k is a lot of money and doing the right thing you can earn better than 2.6%

 

[hrv]

Yup keep your money in the bank. Sometimes the old OPM is best. Other people's money ie the bank. 18k is a lot of money and doing the right thing you can earn better than 2.6%

What bank is paying 2.6% interest????? I would like to find that out..

 

[Schandyman]

Roslyn savings bank.

6.78% theres plenty out there

 

[Rand]

I hear citibank is paying 12x the national average at their savings account.. you even get 100 if you deposit 20000........ (/sarcasm)
They dont even put the number 2 footnote in the email that says the national average is .06%

so its .72% Get about 20 of these a month from discover/chase/citi/BOA etc.

 

[javacontour]

Roslyn savings bank.

6.78% theres plenty out there

I'd like to see some evidence of that rate. I don't see any savings or CD products paying more than about 1% in New York, where Roslyn Savings Bank is located as part of New York Community Bank.

 

[Schandyman]

I'd like to see some evidence of that rate. I don't see any savings or CD products paying more than about 1% in New York, where Roslyn Savings Bank is located as part of New b

I'd like to see some evidence of that rate. I don't see any savings or CD products paying more than about 1% in New York, where Roslyn Savings Bank is located as part of New York Community Bank.

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