Why I’m Not in a Hurry to Pay Off My Car Loan

December 7, 2018

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Call me a bad personal finance blogger, but I’m not in that big of a hurry to pay off my car loan.

A couple of months ago I finishing paying off my student loans, and I’ve been credit card debt free for over a year now. All that’s left to pay off is my car loan and my new home mortgage.

If I applied the same intensity to my car loan that I used for some of my other financial goals, I could probably have it paid off in under a year. But I’m not going to.

Here’s why.

1. It’s Low Interest Debt

First of all, my car loan is at a super low interest rate. I was able to lock in a low rate a few years ago when I took out my car loan with a local credit union.

Because my car loan is at such a low interest rate, I know there are better things I can be doing with my money right now instead of putting all of it into paying off my loan ASAP.

For example, the interest rate on my new home loan is actually HIGHER than my car loan! I also need to make a few home improvements to my new place for safety reasons, so I’ve been putting aside money in preparation for those projects.

Continuing to build my emergency fund may not net me as much financial return in terms of strict ROI. I would save more money paying off my car loan instead of earning interest on my savings, but my building my emergency fund gives me more peace of mind!

A Note About My Love of Credit Unions

A low interest rate is just one good thing about being a member at a credit union instead of always turning to a bank for financial products. Credit unions have their members’ best interests in mind, which includes lots of awesome benefits that vary depending on which credit union you become a member of!

If your car loan, or any other loan for that matter, is at a high interest rate with a bank, you might want to look into refinancing with a credit union to see if you can get a lower rate! For example, PenFed offers auto refinancing loans for as low as 2.49%* depending on the amount you borrow and the term you choose.

You will have to qualify to be a member of whichever credit union you choose, but most credit unions aren’t too difficult to get into. Some have membership requirements tied to your location, while others may be tied to your job industry. You usually have to make a small deposit into a savings account too in order to become a credit union member. (Think $5 or $10! It’s a really small amount!)

2. I’m Super Tired

Ok hear me out on this one for a minute.

After working to pay off debt, build savings, and grow my income by building my business for the last FIVE YEARS, I am super tired.

I talked a bit about this in my last monthly update too. Basically, I need a break because I am only human.

I’m coming to terms with that fact that might mean my income may actually drop a bit as I continue to narrow down my client list in my business, and it might mean slower financial progress at paying off my remaining debt and building savings.

I still want to be debt free and to have a secure financial future of course, I just may take a bit longer to get there.

Burnout is so real you guys!

3. It’s My Money and I’ll Spend it if I Want to!

Bonus points if you sang that in your head like “It’s my party…” 🎶

I’ve never really been a frugal person. I was frugal for a season when I really had to be because I had no choice but to stop spending money (since I didn’t have any). Things are better, and yes, a bit easier, these days.

I earn a nice income and I’ve paid off a lot of debt. I’ve built the beginnings of a nice savings account and worked my butt off to accomplish these things.

Maybe I’m being a bit entitled, but I did work for my money and sometimes I just want to spend it on the things, experiences, and people I enjoy.

So, sue me! (Seriously, I’d really rather you don’t actually sue me!)

My Compromise

Although this post is all about how I’m not going all-in on paying off my car loan, I am still making extra payments.

Right now I’m paying 3X my normal monthly payment. My rough estimate is that at this rate I’ll have my car loan paid off in about 12 months. Who knows what will happen between now and then.

Maybe I’ll decide to ramp up my payments after I’ve taken this “break” from moving forward with such intensity.

Perhaps I’ll stop making extra payments at all because a big opportunity will arise that I’ll want to pursue with my money instead.

God forbid it, but maybe something bad will happen and I’ll need to use all of my newly-freed-up cash flow to help pay for some kind of emergency.

I have no idea what the future will hold. None of us really do, but I hope to continue working on my goals and making progress toward the life I’m dreaming of in my head and I’ll keep you updated along the way!

*Rates effective December 1, 2018.

This post is in collaboration with PenFed Credit Union. The views expressed in the article are the views of the author and do not necessarily reflect the views of Pentagon Federal Credit Union. PenFed Credit Union is an Equal Housing Lender and is federally insured by the NCUA.


4 responses to “Why I’m Not in a Hurry to Pay Off My Car Loan

  1. I laughed when my husband and I were sitting in the finance office, signing our lives away on our new car and he asked about the option of making extra payments. Don’t get me wrong, the PF nerd in me was so happy to hear him say that! But I knew that if we ever had any “extra money”, the car with a 0.1% interest rate would be the last thing we’d throw that money towards. So I hear ya! Paying off those credit cards and my student loan will be where I “hurry”.

  2. I’d say it sounds like you’re still being pretty responsible and making good progress on the remaining debt, so I think you’re doing just fine. You’re still on top of everything. Keep up the good work!

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