stock index vs. individual stocks?

[disneysteve]

I don't beleive in taking all your dough and paying down a loan because then you lose leverage.

I respect the leverage argument because cash in hand can be better than debt-free but broke.

OP is considering putting spare cash into a taxable bond fund that currently yields about 3.6% before taxes (and probably more like 3% after taxes). At the same time, he would be holding onto a loan on which is he paying 5.24% interest.

Prepaying the loan will clearly save him the most money. However, it will also leave him without that cash on hand. If his goal is to make a down payment on a house, prepaying the loan won't help him because he'd be using that cash to pay off the loan rather than setting it aside for the house purchase.

Something else to consider, though, is that reducing the car debt will improve his credit situation and possibly qualify him for a better mortgage. There is no simple answer here.

[investingnoob]

True, I definitely don't want a car payment when I buy a house, ill obviously have it paid off by than.
question is wouldn't it be better to pay it off in say 4 months and be payment free then just save all I can for when I buy a house in a few years?