Pay off car early???

Question

I have the exact amount in my savings to pay off my car 1 1/2 years early. Its about 5,500. A good amount saved up. My car payment is high, and it would be so helpful to pay off my car and have that extra money to continue to save and for emergencys and so money does not seem so tight. So do I pay my car off early and wipe out my savings, or do I just bare through the last 1 1/2years of living tight because of my car payment??? I would like to be as debt free as possible, so I feel if I pay off my car, that frees up a lot more money to help me pay off other things. Becauce that car payment makes it hard for me to pay off other things...I hope this makes sense and I hope I get lots of suggestions! Thanks for taking the time!!!

Answer 1

It's best to have an emergency fund of 6 months expenses, I would keep the money you have in savings.  Are you on a budget?  If not you can download a free budget workbook from:  http://www.bills.com/guide/

or use an on-line tool at: http://www.kiplinger.com/tools/budget/

By comparing your monthly income and expenses you may find you have extra income to pay off your car loan or the other things.  I would apply any extra income to the debt with the highest interest rate.  Once you have all your debt paid keep your spending within your income to avoid future debt, a budget will help you do that.

God bless!

Answer 2

I would suggest payig off the car, especially if it is high interest.  I work in a Bank in the Auto Loan division.

That is just what I would do, so I wasn't making high interest car payments for another 9 months or so by paying half. Think of the savings with the interest you will not be paying in addition to the actual payment.

Answer 3

Why not take half your payment out of savings and the other half out of your paycheck till you pay it off?  That way you still have money set aside for emergencies. You won't have to start all over to save. But then again, if you use all of your savings to pay the car off, you'll have the money from your car payment to put back in your savings immediately.  hummmm....

Answer 4

If there's any chance that you could save up a little more for another couple months then pay it off, that would be a perfect situation. Completely emptying your savings account may not turn out the best, it's always a good idea to have at least some money saved up in case of an emergency.

Answer 5

No, pay of half the car.  Reduce monthly payments.  Keep money for emergencies while you save the remainder (from the money you're saving too monthly from lower payments).  The pay off the other half.  You will still have your savings and can continue to save.