Pay off car faster or build up emergency fund?

[TATE MOOOOOOOOOOOOOOODE!!]

Post 9/11; this is the BAH allotment

Shit, that much only? I know it's based on the zipcode but sounds like they're doing you dirty considering I was getting almost triple that 15 years ago while only paying $400 for rent and a couple hundred more for bills and groceries.

 

[666NASTYFUCKINGFREAK666]

Shit, that much only? I know it's based on the zipcode but sounds like they're doing you dirty considering I was getting almost triple that 15 years ago while only paying $400 for rent and a couple hundred more for bills and groceries.

It is the online rate too. Not like my zip code gets that much more though lol. A little south is $2200 though.

 

[beautiful person]

Most of the times I have dealt with car loans, student loans, and the like, when I paid extra over the minimum payment, the result was that my next month's payment was reduced by the extra amount. It was effectively counted as prepayments against the later payments due. After keeping this up for a while, I was able to skip a payment here and there, and still payed off the car early.

When I was paying off my student loans, I always opted out of having the overpayment apply to the next month's balance, so the minimum payment was always the same regardless of what I paid the previous month. But I was trying to pay that shit off as fast as possible.

 

[reptile baht spaniard rid]

You're in college, what emergency you gonna hit.

Also sell that POS car. Fucking goddamn cars. Cars and their loans have been a disaster for the GI race. Buy a shitbox beater.

If you do pay extra, make sure it's going to principal.

 

[lichen]

You're in college, what emergency you gonna hit.

What emergencies are less possible when you’re in college? Maybe if they’re living in a dorm there’s less that can go pear shaped in their living situation.

But you can still get a call that an older relative has died and you should come home for the funeral, the car they rely on shits the bed and they need to fix/replace, get an unexpected tax bill, break an arm while at a dump party etc. Students still have exposure to the same shitty world as the rest of us.

 

[666NASTYFUCKINGFREAK666]

Realized that my loan was actually originally 17.2k, currently 16k, so I guess if I put it all into the car I'll actually have it paid off in a year exactly, so I'll do that and save the leftovers

 

[oh no its pipkun]

What emergencies are less possible when you’re in college? Maybe if they’re living in a dorm there’s less that can go pear shaped in their living situation.

But you can still get a call that an older relative has died and you should come home for the funeral, the car they rely on shits the bed and they need to fix/replace, get an unexpected tax bill, break an arm while at a dump party etc. Students still have exposure to the same shitty world as the rest of us.

or he gets fired from the job that lets him squirrel away the $1107.

 

[YazeePro]

Realized that my loan was actually originally 17.2k, currently 16k, so I guess if I put it all into the car I'll actually have it paid off in a year exactly, so I'll do that and save the leftovers

Smart.

And to prove your point, since nobody has shown the math yet, think about it like this:

• In 2024, the average interest you pay on a car loan was 6.35%. Let's assume this is what you pay as well.
• At the same time, the average interest rate on a decent savings account is around 0.45%. Let's assume this is what you'd get as well.

Scenario 1
You owe $16,000 on the car loan with an annual interest rate of 6.35% and make monthly payments of the full $1,077. That means that it will take you 16 months to pay off the loan in full. After that you are debt free and can start saving.
After month 17, you are left with $1077 of assets.

Scenario 2
You make monthly contributions of the full $1,077 towards a savings account. You cover the interest that's accrued by the car loan, but don't actually pay back anything on the principal.
After 16 months you'll have:

• You'll have saved up ~$17,280 (this includes the interest paid to you by the bank).
• But you'll have paid ~$1,350 in interest.
• Additionally, you are still in debt for: $16,000.

If we subtract then your debts from your savings, we end up with a measly $1,280 in assets. But wait, you also need to subtract your interest payments. Meaning that after month 16, you are left with -$70.

Conclusion
If your car loan isn't completely interest free or if the interest rate on the loan isn't smaller than the interest you can accrue on saving the money (protip: none of these conditions apply), then it's always better to pay back your debt first. Otherwise, each passing day will result in a net loss - so, ironically, by saving, you're not actually saving, you're spending.
Better get rid of the loan asap (if you can pay back more than the $1077 that's even better) and avoid going into debt in the future (unless it becomes useful for tax purposes).