I have a car loan with a payoff of $5,200. we pay $200 / mo for 30 more months. We are both retired working part time. Should we pay off the balance now?

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    Do you have the cash to pay it off now? What's the interest rate? What other debt do you have?
    – D Stanley
    Aug 23 '19 at 14:35

It depends on a few things. Since you are asking if you should pay off the car loan, I assume that in your checking/savings account (or similarly liquid account) right now you have an extra $5,200 that you could use to pay it off without it putting yourself under any financial distress. If, for example, you paid it off today and then next week had an unexpected few-thousand dollar expense and would have no problem covering it, then it is certainly reasonable to be entertaining the idea of paying it off now. If paying off the car loan today means that an unexpected expense next week would end up on a credit card and take months to pay down, then paying off the car loan now is likely not a reasonable option.

Assuming that you have adequate funds to comfortably pay it off now, it's primarily a matter of interest rates. If your car loan rate is below the prevailing high interest savings/money market/CD rates then there is no financial incentive to pay it off early, but doing so anyway could bring peace of mind. If you have other debts with interest rates higher than the car loan, then there is no reason to pay the car loan off early, the higher rate debts should be prioritized.

There's a chance you could make more money by investing than by paying off debt, but debt repayment is guaranteed benefit, so unless the rate is very low, I'd take the guaranteed benefit of paying off debts rather than banking on the market to out-perform the interest rate on my debt.


This can't be answered in a vacuum. The loan does seem to have a high interest rate (I'm calculating about 11% based on the balance, payment, and remaining payments) so it is definitely a good candidate to wipe out, but let's be sure.

First let's see if you should pay it off:

Do you have any other debts (other than a mortgage)? If you have high-interest credit card debt, that would be my first choice.

Not let's see if you can pay it off:

Do you have the cash to pay it off today (leaving a few thousand in savings for emergencies)? If not - how much do you have in your budget to pay off debt? Can you get it (and all other debts) paid off in the next year or two?

If you should pay it off but can't, then the next best option is to sell the car, buy a cheaper one either with cash or cheap enough that you can pay it off quickly. Then start saving up for a nicer one.

  • 1
    +1 to (most of) this. 11.4% is "hair on fire". If paying it off will wipe out your cash reserves, then pay off half of it.
    – RonJohn
    Aug 23 '19 at 15:32

we pay 200 / mo for 30 more months.

Is that an inconvenience? Can you continue paying this way without affecting your goals or projects?

we are both retired working part time. should we pay off the balance now

Is this 200/Mo too much to handle?

If the part-time salary is high enough, I'd consider paying it all as quickly as possible to avoid interests. However if the retirement funds and salary will not allow you to pay more than this 200/Mo, then it's not really an option.

Therefore my bottom line is, if you CAN pay 600/Mo instead of 200/Mo without affecting your life quality, well do it. If you CAN pay more or pay it faster, do it; it will pay off on the long term.

  • 1
    thanks, I think we will pay it off as it would also save us about 1000 over the life left of the loan Aug 23 '19 at 14:42
  • @RickThomsenSr. Then yes, absolutely the right decision in my opinion
    – Musuyajin
    Aug 23 '19 at 15:07

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