Should I contribute to my IRA or pay off my car loan first?

"I have a car loan at 3% interest. I have the $6,000 to pay off the loan, or, with that cash, I can max out my Roth IRA contribution, which is earning about 7%.

Which one should I do first?"

Answer
“It’s all about your preference. If you still have time to maximize your yearly IRA contribution, that can clearly wait.
However, your car loan will continue to gain interest. Conversely, the $6,000 might be better spent on the IRA because you’re getting a better return.
Thus, the choice is up to you. If you want to get out of debt more quickly, go with the loan. But if it’s not crippling you, don’t stress and contribute to your IRA.”
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Eric Schad
Answered on Jun 07, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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