Should I pay off my car loan if I have the money and my interest rate is only 2%?

"I've had the money to pay off my car loan for awhile. But with an interest rate at only 2%, I'm wondering if I should.

Is it always a good idea to pay off your car loan early?"

“It depends. Can you pay off the loan and still have enough money set aside for emergencies? If paying off the loan brings your savings to zero, it’s probably not a great idea.
Think about investing. The idea is whether you can invest the money for more than the interest rate. Let’s say your loan balance is $5,000. If you invest that $5,000 and only make 3% on it, while your loan is just 2%, it makes sense to keep paying the monthly loan amount instead. This is because you’re coming out ahead, and you don’t have to give away $5,000 right now.
If you can make more investing the money than the car loan interest rate, hold off on paying the remaining balance.”
Eric Schad
Answered on May 26, 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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