Pay off debt with savings?
Hi all — I’m looking for some advice on how to proceed on the following.
After this month, I’ll have about $15,000 saved.
I currently have about $7,000 left on a car loan for a 2013 vehicle. The payment is $275/month at an 8% interest rate and I believe I have 2-3 more years left on the loan. With the savings I have now, should I just pay it off in a lump sum? I think I’m stuck in the mindset of constantly chasing higher savings milestones as the first 10k was extremely rewarding.
My $15k is split between two HYSAs earning 3.20% and 3.50%. Logically, I know those returns are lower than the 8% interest on the car, but I also worry about draining savings and then getting hit with major maintenance costs since it’s an older vehicle. I want to keep this car as long as possible because i know that’s the best move financially but also don’t want to pour too much into it. What’s the best approach for this?
Outside of that, I use credit cards for nearly everything and pay them off in full monthly to maximize rewards. My credit score is around 750 but hasn’t moved much. Is there anything else i should be doing to improve it? The only other debt i have is a $5,000 student loan at 4.74% interest. I’ve already paid off the rest of my school debt.
So, focusing just on these amounts and not on other investments or safety net, what is the best financial approach? I want to make the smartest decision and I know that chasing the higher savings goals may be delaying me in the long run. Any advice is greatly appreciated.