A Redditor Asks If They Should Pay Off Half Their Auto Loan Or Invest The Money Instead: ‘I’m Genuinely Torn’
From Yahoo Finance: 2025-05-16 22:00:00
Paying off debt and investing are ways to build wealth. While high-interest debt should be a priority, low-interest debt like mortgages can be less urgent. One Reddit user faced a dilemma with a $13,500 auto loan balance and $6,000 windfall, seeking advice on whether to pay off the loan or invest in the stock market.
Fellow Redditors offered suggestions on building an emergency fund with the windfall to avoid future loans. The auto loan has a 6.8% APR, accumulating interest faster than savings. Having a six-month emergency fund is crucial, but if already established, it may be wiser to pay off the loan.
Some commenters favored paying off the auto loan early due to its 6.8% APR. Others emphasized considering tax implications when comparing extra loan payments to high-yield savings accounts. Paying off the loan may save more money in the long run, especially if other emergency expense options are available.
One commenter shared their experience paying off an auto loan with a windfall, highlighting the freedom from monthly payments as a significant benefit. The original poster also saw freedom as a key factor, wanting to reduce interest and monthly payments by paying off half the loan. Investing in the stock market offers potential for higher returns, but paying off the loan guarantees savings.
In a similar scenario, another commenter chose to pay off their auto loan with a windfall, valuing the peace of mind from eliminating monthly payments. While a high-yield savings account can provide an emergency buffer, paying off the loan is a more efficient approach. Investing in the stock market can yield higher returns, but paying off debt ensures guaranteed savings.