*Loan,banking and credit>>>auto loan

Auto Loan: Should I pay my 8500 from my savings or just keep making payments until dec 2008?

Whats best? To pay off the auto loan and save approx 700$ over the period of 2 years, or just leave that money in the bank in my savings for emergency?

If you got an auto loan there's a good chance it was made under the rule of 78s - this is hard to explain but it basically means that much more interested is paid off during the first 21/2 of a loan term than the end - usually about 75% of interested is paid even though 50% of the time has gone by. They pack the interest payments into the beginning of the loan.

You will want to ask the company who gave you the loan if they were using the rule of 78s when they came up with the loan and payments schedule. It that rule is in effect for your loan you should just keep it and pay it off on schedule. It isn't worth it to pay early because you would in effect be paying a penalty.

The rule of 78 is totally legal for them to do.
I put search in for it and came up with a few links you may want to look into. this way you can kinda get an idea of what the rule of 78's is. Most consumers have no clue it's even out there. but it IS. We should ALL ask about this when purchasing a vehicle. Source(s): http://www.tiac.net/~mabaker/rule_of_78....

http://www.obre.state.il.us/consumer/tip...

http://www.bankrate.com/brm/news/auto/20...

http://www.paranzasoft.com/help/pages/ca...

http://reidtax.com/rule78.html

http://www.amsouth.com/smallbusiness/tip...

whats the APR

can you get a better APR on investments

theres obviously some break even point I dont know what that is and theres never an easy answer on what the future will be for rate of return

id pay off the loan and then you could take the money that you would use to pay off the car to put into an investment, thats just me
Do you need the $8500 for emergencies more, or is the $700 going to make a difference in your life?

The normal solution: High interest rates means invest, low interest rates means borrow.

I wouldn't blow my savings just to save $700 personally. What if a crisis happens tomorrow, and you need emergency cash? What if a tornado hits your house and takes the car also?
Modified 1 year ago
It always depends on your personal situation. I like to payoff the vehicles. It gives yourself a raise as far as cash flow. You have that payment as free cash. Unless it is a business vehicle there are no tax advantages. If you keep paying the loan your making your lienholder richer. Each person must decide. I would pay it off.
http://coolsearches.tripod.com/...