so ive got about 10k in the bank so far, im trying to get to 20k by next april to put a down payment on some property. i took out a car loan about 3 years ago with a high interest(something like 15%). i owe 5780.80 with payments of 289.26 a month(220 in principal, 70 in interest). ive got about 2 more years and 3 months before its payed off. should i pay off my car loan or should i just make the minimum monthly payments and continue to save? right now im saving 1k a month and putting it into saving, if i were able to pay off the car i would be able to have 1300 a month to save.
Here’s your options and timelines as I see them based on your numbers:
Pay off your car now. No more interest on loan. take a hit on savings down to $4220, but can save $300 more per month toward your goal. You can save $1300/mo for 12 months and arrive at your goal of 20k saved by next November.
Make regular monthly payments on your car. It will take you 23 more months from now to be paid off. You will pay roughly $890 in interest. You’ll still have your 10k in savings and only need to save $1000/mo for 10 months meaning you meet your goal next September.
If you take option 2, you’ll still have almost another year of car payments after you reach your savings goal. You have a really high interest rate. It only delays your savings goal by 2 months if you pay off your car now. I would personally get rid of the car payment and then roll that amount into savings.
I’d take the money out of savings, pay the car loan, and then start putting the car payment money into the savings as well as the regular savings amount.
I wouldn’t want to be paying that 15% interest.
At the very least, go by a couple of banks and credit unions and see about refinancing that car loan. One of my local credit unions will refinance a car loan for under 5%.