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Is payoff a good idea?

Have a loan on your car and have been asking yourself: 'is payoff a good idea?'

Nicholas Hinrichsen - Published: August 4, 2020

Continuously asking yourself whether or not paying off your loan is a great mindset! Debt isn't necessarily a bad thing. Everybody should have 'some' debt. Debt allows you to benefit today from future earning.

However, the goal is to have debt at the best interest rate possible! Therefore, if you're asking yourself if paying off your auto loan is a good idea, the answer depends on two things:

  • What interest rate are you currently paying on the loan and can you get money somewhere else for a lower rate?
  • Do you have savings you could use to payoff your loan and can you not invest your savings for a higher return somewhere else?

In sum, a loan payoff is a great idea if the auto loan interest rate is very high, if you have savings and if you can't earn money through investing your savings anywhere else.

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