A car loan can start feeling strangely personal once there is enough money sitting in the bank to wipe it out. Paying off the balance sounds wonderfully clean, especially when the monthly payment has become one of those bills that arrives with the enthusiasm of a telemarketer. But before sending a large check to the lender, compare the interest savings with what that cash needs to do for the rest of the household.
The right answer depends on more than the loan balance. The interest rate, remaining interest, emergency savings, other debts, upcoming expenses, and even the tax treatment of the loan can change the math. A car loan may deserve an early exit, but cash sitting safely in the bank can have a job, too.
