Should I Pay Car Loan With Tax Refund Money?

Debt can be overwhelming, especially when you are paying every month for a car you’re driving. On top of your monthly financing payments, you have to take care of maintenance and repair. So, when your tax refund comes in the mail, are you thinking that it might be time to pay off that loan once and for all? Maybe it’s time to trade-in or buy something else? Check out these tips for how to spend your tax refund money in 2017.  

Using Tax Refund to Pay Car Loan

Paying every month for a car you’re driving all the time can be frustrating. Instead of waiting around for your loan to finally be paid off, are you considering putting your tax refund down to get rid of the monthly payments completely? Consider these questions before you make the call:

•  Do you have other sources of debt that are earning a higher interest rate than your car loan? It might be worthwhile to pay off your credit cards before putting money towards a car loan.
• Is there somewhere you could invest the money to make a bigger return than you are losing on interest by paying your car loan monthly?
• Do you plan on selling the vehicle or trading it in soon? If so, it’s better to have it paid off as you will get a better price for it.

Using Tax Refund Money to Purchase a Car

The tax money arrives and you want to spend it on something worthwhile. You drive every day, so is a car a great place to put the money? First, you have to decide between paying a large chunk on the purchase of a used vehicle or using the money as a down payment on the purchase of a new vehicle. There are benefits to each, so consider each category carefully.

• Buying a new vehicle offers reliability and modern style, but you have to consider your finances down the road. Will you be able to make the monthly payments and handle any repairs and maintenance the vehicle needs as well?
• A previously-owned vehicle offers a lower price, but it’s important to be sure you know what you’re getting. Have a professional inspect the vehicle before you purchase to catch any issues before you put your money on the table.  ‘