| Is it better to have a car loan at 2.5% interest or pay full cash? |
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| Auto Loans | |||
| Written by Editor | |||
| Thursday, 08 July 2010 09:58 | |||
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When considering what you might earn on the cash if you don't pay off the loan, you must consider risk. The financial benefit of paying off the loan are absolutely guaranteed. You definitely won't be paying interest next month if you pay it off. Your alternatives should either give you comparable safety or compensate you appropriately for the additional risk you are taking on. The other view point to consider is: by paying off your car right now, you are "making" 2.5% on that balance. Instead of those finance charges having to be paid (as you signed the promissory note of the loan) you essentially don't have to pay them, making 2.5% on that outstanding balance. Even if you don't have any other investments going, you did pretty well there. You will also be able to lower your car insurance, as you own the vehicle outright. Plus, you will have this great feeling that you don't have that debt obligation, and now you can direct the payment to replenish your savings or to tackle other debt outstanding! 
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