Announcement

Collapse
No announcement yet.

401K versus Car Loan Payoff??

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • 401K versus Car Loan Payoff??

    What makes more sense?

    With the economy my 401K has taken a dive. I'm in it for the long haul so I'll continue to put cash in there. Currently I'm putting 10% of my salary into the 401K.

    That said I have a car loan with right under 5 years left on it @ 14.5% interest (yeah I know).

    Does it make sense to drop back my 401K contribution and take that money and use it to pay the 14.5% car loan down? That's kind of what I am leaning towards but need a second opinion.

    Thanks

  • #2
    The simple answer, I'd say, is to put the money toward the loan. Your interest rate is insane and the loan is much too long. It will cost you a ton of money in interest if you keep it for the full term.

    That said, I'd want to know more about your situation. How long was the loan to begin with? What is the balance? What is the current value of the car? Has your credit improved significantly since you took out the loan? I have to assume it was pretty bad to warrant a rate that high. If your score is better now, perhaps you could refinance. If the car is too expensive, it might make more sense to sell it and buy something cheaper, but I'd need more details to say that for sure. Just the fact that your loan was 5 or more years long tells me it was probably more than you could really afford.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    Comment


    • #3
      contribution up to the match with your 401K and continue to payoff your car note.

      Comment


      • #4
        I agree with steve, depending on your situation, I would consider selling or refinancing. At the very least, applying all funds after your match on the 401k.

        Do you have an EF?

        Comment


        • #5
          Don't let any contribution matches from you employer go to waste, that's just losing out on free money. So contribute up to the match, if you have one, and then put the rest in towards the car payments.

          The only time that you would want to invest that money rather than putting it towards your loan payments is if you think you can get a higher return somewhere else. I don't think you're going to find returns any higher than 14.5% so I would say to pay that off ASAP!

          Hope that helps

          Comment


          • #6
            I have to agree with Steve and Maat what is your current loan balance-honestly a 5 year car loan is nuts-means your probably have a car that is much more expensive than you can actually afford.

            Comment

            Working...
            X