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Should I invest my $40,000 or pay off my car loan?
"I have $40,000 saved up, and I also have a car loan for $25,000 at 3.5% interest.
I was thinking of paying off my car loan, but I can probably make more than 3.5% by investing.
What should I do?"
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“At 3.5%, you’d be better off investing the money rather than paying off your car loan.
The idea is that if you can make 3.5% or more on your investments (which is typically achievable through ETFs or mutual funds), it negates the amount of interest you’re paying on the loan.
Plus, leaving your loan open can increase your credit score in the meantime. If you want to pay it off faster, you can always put money toward the principal.
Keeping the car loan and investing your savings is probably your best option.”
View full answer
- Gregory R.
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