Pay off my car loan?

[eric302]

I'm 25, living alone, and doing pretty well right now - starting from pretty much nothing I've been working a good job with few expenses for about a year. I just came into some money so I have about $50K of savings now and just started putting $250/month into a 401K. The only debt I have left is about $18K@2.9% on my car (I bought the car when I got the job). Is there any reason I shouldn't just pay the whole thing off right now? I don't anticipate any big expenses coming my way, and even if they did I'd probably sell the car regardless of the loan.

[kork13]

In your situation, paying off the car doesn't sound like a bad idea. Do you know approx. what your monthly expenses are? Hold onto 6-8 months' worth (or more) of expenses in savings as safety net for yourself. What would that be, $20k-$25k? Go ahead and pay off the car loan, you'll be glad to have that off your back. With the rest, I'd look into a Roth IRA and/or increasing your 401k contributions. With your debts gone, you can also start saving up for future purchases, such as a home, new car later on, or whatever goals you may have. Congrats on situating yourself in a good place financially.

[disneysteve]

You don't say how much you earn or what your monthly expenses are. If you take 18K from savings and pay off the loan, will the remaining 32K be at least a 6-month emergency fund, meaning enough to cover all expenses for 6 months if you were to lose your income?

My other question would be what percentage of income is going into retirement savings? If it isn't at least 10% and preferably 15%, I'd boost that before I worried about prepaying the car loan since the interest rate is so low.

[watsoninc]

I would definitely write the check and pay off the car unless your annual income is below $36,000. In that case, I would sell the car because the car would be too much of your financial world. A general rule of thumb is that you don't want more than half of your annual income tied into things that depreciate in value, i.e. cars. Good luck!

[faithman1012005@yahoo.com]

I would pay off the car, but I do agree with watsoninc that if your income is below 36,000 to find a car to fit the budget. I currently purchase my cars with cash by simply putting aside a monthly fake car payment that goes into savings and then bargain hunt for auctions etc.. and offor cash. Wish you the best!