Should I invest my $40,000 or pay off my car loan?

"I have $40,000 saved up, and I also have a car loan for $25,000 at 3.5% interest.

I was thinking of paying off my car loan, but I can probably make more than 3.5% by investing.

What should I do?"

Answer
“At 3.5%, you’d be better off investing the money rather than paying off your car loan.
The idea is that if you can make 3.5% or more on your investments (which is typically achievable through ETFs or mutual funds), it negates the amount of interest you’re paying on the loan.
Plus, leaving your loan open can increase your credit score in the meantime. If you want to pay it off faster, you can always put money toward the principal.
Keeping the car loan and investing your savings is probably your best option.”
avatar
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.
thumb-up

Did this answer help you?

Ask us a question by email and we will respond within a few days.
thumb-up

Have a different question?

You can meet us at our office and discuss the details of your question.

Read advice from car experts at Jerry

Easiest way to compare and buy car insurance

√
No long forms
√
No spam or unwanted phone calls
√
Quotes from top insurance companies
Find insurance savings — it's 100% free