Personal Investment & Financial Planning Q`s/Car payment

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Question
Hi,
We owe around $15,000 on our second car. The payment is $264/ month and We pay about $44 interest on it each month. We have about $41,000 in an Ally savings account where we have a .9 interest rate. We have no problem covering the monthly payment, but I was wondering if it would be smarter to pay it off with our savings and instead put like $200/ month back into the savings account.  Mostly I would love to have one less payment to remember each month.  

Thanks so much for your time!
Jaime

Answer
Hi Jaimie,

Based on the info below, you earn around $135 each year on the $15,000 that you have in Ally bank that could be used to pay off your car loan. From a financial perspective, it appears the cost of the loan is greater than the interest you will earn on your savings. The caveat I would mention is the important of also having an emergency reserves fund that typically is equal to 6 months of living expenses. It may be worthwhile to keep the $15,000 in the bank if it results in your maintain an appropriate emergency fund. I hope this helps.

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John D Smith, CFP

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