{"id":11121,"date":"2026-07-08T03:41:45","date_gmt":"2026-07-08T03:41:45","guid":{"rendered":"https:\/\/www.fintechpulse8.com\/?p=11121"},"modified":"2026-07-08T03:41:45","modified_gmt":"2026-07-08T03:41:45","slug":"dave-ramsey-shares-blunt-advice-on-your-car-loan","status":"publish","type":"post","link":"https:\/\/www.fintechpulse8.com\/?p=11121","title":{"rendered":"Dave Ramsey shares blunt advice on your car loan"},"content":{"rendered":"

<\/p>\n

If you are working hard to stay away from debt but still find yourself tied to a monthly payment, you are not alone.<\/p>\n

But personal finance author and radio host Dave Ramsey often reminds his followers that carrying debt of any kind is an unnecessary risk \u2014 especially when your income isn’t guaranteed from month to month.<\/p>\n

In fact, one recent advice-seeker asked Ramsey about managing a fluctuating income while balancing savings and an auto loan, according to an email sent to TheStreet from Ramsey Solutions.<\/p>\n

\u201cDear Dave,\u201d wrote a man named Mike. \u201cI\u2019ve never had a credit card in my life. I do have a $600 monthly car payment right now, and it\u2019s my only debt. I owe $10,000 on the vehicle.”<\/p>\n

“Currently, I have a six-month emergency fund saved, plus $25,000 in a regular savings account,” he added. “I\u2019m in sales, so my pay often fluctuates from month to month. Should I pay off the car from savings, or hang on to that money just in case things in my job take a downturn?\u201d<\/p>\n

Ramsey offered some advice about how Mike should approach his immediate financial structure, including the risk associated with variable income.<\/p>\n

\u201cI\u2019m proud of you for never caving in to the temptation of credit cards,\u201d he wrote. \u201cThat sets you apart from the vast majority of folks in America today.” <\/p>\n

“But I\u2019m not letting you off the hook on the car payments.\u201d<\/p>\n

Dave Ramsey explains the true cost of car loans<\/h2>\n

Ramsey was quick to acknowledge the man’s solid financial foundation while pointing out the danger of keeping the loan.<\/p>\n

\u201cI don\u2019t care what anyone else says, debt is never a good thing,\u201d he wrote. \u201cAnd it\u2019s absolutely the last thing you want in your life when your job compensation structure is unpredictable.\u201d<\/p>\n

He urged the advice-seeker to visualize how much more freedom his monthly budget would have without the burden of a loan.<\/p>\n

\u201cNow, it sounds to me like you\u2019re in pretty good shape financially, except for the car payments,\u201d he continued. \u201cIt may be the only debt you have, but it\u2019s still like a ball and chain around your neck when it comes to your money.\u201d<\/p>\n

The Ramsey Show host then focused on the mathematical and emotional benefits of becoming completely debt-free.<\/p>\n

\u201cI want you to take a moment, and think about all the great things you could do if you didn\u2019t have that monthly payment flying out the door,\u201d he wrote. \u201cI mean, an extra $600 in your pocket every month would be pretty cool, right?\u201d<\/p>\n

Ramsey encourages eliminating risk and choosing freedom<\/h2>\n

The personal finance coach had a straightforward action plan for using existing savings to clear the remaining balance.\u201cIf I were in your shoes, I\u2019d take $10,000 out of savings today, and pay off that car,\u201d he asked. \u201cYou\u2019d be completely debt-free in a heartbeat, plus you could rebuild your savings in no time with the money you\u2019ll free up.\u201d<\/p>\n

He also reassured the reader that taking this step would not leave him financially exposed.
\u201cOn top of all that, you\u2019d still have your emergency fund of six months of expenses sitting there untouched,\u201d he added.<\/p>\n

That\u2019s when Ramsey drove home his core philosophy regarding borrowing money and peace of mind.<\/p>\n

\u201cDebt always equals risk, Mike. Always,\u201d he wrote. \u201cWrite a check today, man, and pay off that car. You\u2019ll be surprised at how much lighter and more comfortable you feel with no debt\u2014or the potential consequences of debt \u2014 weighing you down!\u201d<\/p>\n

\n

Dave Ramsey advises paying off a car loan with savings rather than dealing with a monthly car payment burden with interest.<\/p>\n

Shutterstock<\/p>\n<\/figcaption><\/figure>\n

3 real-world approaches to paying off the car<\/h2>\n

I decided to calculate what might happen over a two-year window by looking at three very basic, but different, approaches you might take to paying off the car, should you find yourself in Mike’s circumstance.<\/p>\n

Each scenario assumes you have a $10,000 balance at a 6% interest rate with 18 months left on the loan, resulting in that $600 monthly payment. By comparing these paths, we can clearly see the hidden costs of holding onto debt versus the power of freeing up your cash flow.<\/p>\n

Scenario 1: Paying off car loan immediately<\/h3>\n

If you write a check to eliminate the loan today, you instantly save about $480 in remaining interest charges. <\/p>\n

Your savings account drops from $25,000 to $15,000, but your six-month emergency fund remains completely safe and untouched. Because you no longer have a $600 monthly car payment, you can immediately redirect that cash back into your savings. <\/p>\n

Over the next 24 months, pocketing that extra money allows you to completely rebuild your savings back to its original strength, leaving you with no debt and maxed-out financial security.<\/p>\n

Financial tally:<\/strong> You spend exactly $10,000 to kill the debt, save $480 in interest, and accumulate $14,400 in freed-up cash flow by month 24.<\/em><\/p>\n

Scenario 2: Keeping cash in savings while paying off car<\/h3>\n

If you decide to hold onto the $25,000 out of fear of a job downturn, you will finish out the 18 months of payments as scheduled. Over this time, you will hand over that extra $480 in interest to the lender. <\/p>\n

Even if your savings account earns a decent interest rate, the math rarely works in your favor after factoring in taxes on that interest. <\/p>\n

While you maintain a larger cash cushion initially, you spend a year and a half sending $600 out the door every month, leaving your monthly budget highly vulnerable to any sudden drops in your sales commissions.<\/p>\n

Financial tally: <\/strong>You spend a total of $10,480 over 18 months, losing $480 to interest while your monthly budget remains squeezed until the loan naturally expires.<\/em><\/p>\n

Scenario 3: Investing instead of paying car loan immediately<\/h3>\n

If you decide to leave the car loan alone and put that $10,000 into a conservative investment, you are essentially gambling that your investment returns will beat the 6% guaranteed cost of the debt. <\/p>\n

A conservative investment, like a high-yield savings account or short-term bonds, typically yields around 4% to 5%, which is a very reasonable and safe expectation but fails to outpace the 6% cost of the loan. <\/p>\n

While trying for a higher return in the stock market historically averages 7% to 10% over long periods, expecting that gain over a short two-year window is highly unreliable due to unpredictable market downturns. Over a short two-year window, market fluctuations could easily leave you with less than you started with, all while you are still stuck making those heavy monthly payments. <\/p>\n

Choosing to invest while carrying a high monthly obligation increases your overall financial risk without providing a guaranteed reward.<\/p>\n

Financial tally: <\/strong>You spend $10,480 on the car loan. In this scenario, your investment must grow by more than $480 after taxes over 24 months just to break even with the cost of your debt.<\/em>However, you could hold onto that investment over a longer term than just the 24 months and give it more of a chance to earn value.<\/em><\/p>\n

Note:<\/strong>\u00a0This piece of financial journalism is for educational purposes only and not for formal tax or investment advice.<\/em><\/p>\n

Related: Dave Ramsey warns Americans on 401(k)s, IRAs (he’s not wrong)<\/strong><\/p>\n

#Dave #Ramsey #shares #blunt #advice #car #loan<\/p>\n","protected":false},"excerpt":{"rendered":"

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