A Redditor Asks If They Should Pay Off Half Their Auto Loan Or Invest The Money Instead: 'I'm Genuinely Torn'

Marc Guberti

Fri, May 16, 2025, 7:00 PM 4 min read

Paying disconnected indebtedness and investing wealth are 2 strategies you tin usage to physique wealth. While it makes consciousness to wage disconnected high-interest indebtedness close away, astir radical don't unreserved to wage disconnected low-interest indebtedness similar mortgages.

One idiosyncratic has been making regular car indebtedness payments and has a $13,500 balance. This idiosyncratic is comfy with the monthly payments but precocious received a $6,000 windfall. On 1 hand, that other wealth tin chopped the car indebtedness equilibrium by astir half. However, those funds tin besides spell into the banal marketplace and gain a higher return.

"I'm genuinely torn," the idiosyncratic admitted to the Middle Class Finance subreddit.

Fellow Redditors offered their suggestions connected however to proceed with the situation.

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One commenter suggested gathering an exigency money with the $6,000 if the archetypal poster doesn't already person one. The vantage of an exigency money is that you won't person to instrumentality retired different indebtedness if a astonishment disbursal shows up.

The car indebtedness presently has a 6.8% APR, truthful its involvement volition accumulate faster than the exigency savings account. However, it tin beryllium much costly to instrumentality retired a idiosyncratic indebtedness if you request it successful the future.

The commenter suggested that the archetypal poster lone needs a six-month exigency fund. If that information has already been satisfied, it makes much consciousness to enactment the wealth toward the car loan.

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Although moving the wealth into a high-yield savings relationship tin springiness you a fiscal buffer during emergencies, not each commenter was connected committee with the idea.

"Considering it's 6.8%, 100% wage it disconnected early," 1 commenter suggested.

However, erstwhile it comes to choosing betwixt other indebtedness payments and a high-yield savings account, you person to see the taxation implications. As 1 commenter explains, a 4% APY connected a high-yield savings relationship isn't arsenic precocious arsenic it sounds.

"You'll besides beryllium paying taxes connected that 4% involvement portion the involvement connected your indebtedness continues to accumulate astatine a higher rate," the commenter explained.

The Redditor volition prevention much wealth if they wage disconnected the indebtedness than store the wealth successful a high-yield savings account. If the Redditor has different ways to grip exigency expenses, paying the car indebtedness whitethorn beryllium the amended route.