A Redditor Asks If They Should Pay Off Half Their Auto Loan Or Invest The Money Instead: ‘I’m Genuinely Torn’

The payment of debts and investment is a two -strategies that you can use to build wealth. Although it makes sense to pay high -benefit debts immediately, most people do not push for low -interest debts such as mortgages.

One individual pays regular car loans payments and has $ 13500. This person is comfortable with monthly payments, but he recently received $ 6000. On the one hand, this additional money can reduce the auto loan balance by almost half. However, this money can also enter the stock market and earn a higher return.

“I am really torn,” the individual admitted to financing the sub -class.

His colleagues have made their suggestions on how to follow up with the situation.

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One of the commentators suggested building an emergency box with $ 6000 if the original poster does not already contain one. The emergency fund’s feature is that you will not have to obtain another loan if sudden expenses appear.

The car loan currently contains 6.8 % APR, so its benefit will accumulate faster than the emergency savings account. However, getting a personal loan may be more expensive if you need it in the future.

The commentator suggested that the original poster only needed an emergency box for a period of six months. If this condition is already satisfied, it makes sense to put money towards the car loan.

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Although transferring money to a high -yielding account can give you a financial store during emergency situations, not every commentator on board the idea.

“Given that he is 6.8 %, 100 % pays it early,” one of the commentators suggested.

However, when it comes to choosing between additional loan payments and a high -return savings account, you should consider the tax effects. As one commentator explains, the APY 4 % at the expense of high -return savings is not as high as it seems.

“It will also pay taxes at 4 % interest while the interest on the loan continues to accumulate at a higher rate,” the commentator explained.

Redditor will save more money if they pay the loan from storing money in a high -yielding account. If Redditor has other ways to deal with emergency expenses, pushing a car loan may be the best way.