Pay down auto loan or put in a CD?

Auto loan: approx. $17,000 left at 4.75%

Non-essential savings: $20,000 and can get a CD at 5.9%

I pay $560 a month for the loan and have no other debt.

I don't like having debt... so should I just pay down $10,000 or so should I just put my money in a CD?

Pay down auto loan or put in a CD?

Take some of your savings and pay the auto loan down to about $10000. That will leave you with about $13000 in savings. You didn't mention your monthly income, but if it is possible for you to keep about 2 months of earnings in savings, then you should take the rest and invest it in a good quality mutual fund rather than a CD. The interest earned on a CD is taxable income, so a 5.9% interest rate is reduced due to income taxes. If you are in a 25% bracket, your effective earnings on a CD would only be 4.42% which is lower than the interest you owe on the auto loan. Also, you didn't mention anything about credit cards. Make sure that you pay them off IN FULL every month.

Pay down auto loan or put in a CD?

Your auto-loan is helping your credit score, but aside from that, it wouldnt' be a bad idea to pay down the balance by quite a bit so you feel better, and then if something ever happens, you can sell becuase its worth more than you owe.

Pay down auto loan or put in a CD?

If you pay down the auto loan you will be saving 4.75 % on the money but if you get a CD you will be making 5.9%. Assuming the car payment is within your means you come out ahead in the long run putting the money in the CD.

Pay down auto loan or put in a CD?

Don't put it in a CD. CD stands for Captive Dollars. You can't touch it without paying a penalty on it. While it may be non-essential savings, you never know when an emergency might rise.

1. If you don't have one, take about 3-6 months of your gross salary out of the 20k and put it in a good Money Market account. The ground floor of any financial house is a fully funded emergency fund.

2. Take $4,000 of whatever is left and if you don't have an Individual Retirement Account set up yet, start one*. Preferrably a Roth IRA since they are after-tax dollars.

*consult a financial specialist because there are income limits if you currently have a 401(k).

3. For the rest of what's there, start looking at more liquid investments such as stocks, bonds, and mutual funds. All three of these are made for long term investing, i.e. non-essential savings, and have features that allow to cash out without having to pay a penalty, depending on what you choose. There are some municiple bonds that can pay upto 8% interest or possibly more that can be tax free.

While the CD is going to guarentee you a rate that other products cannot, it robs you of flexibility. Depending on your age and risk comfort, you should probably be thinking more long term. Consult a financial advisor and explore ALL of your options, not just what the bank gives you.