I don’t know I think paying off the car loan with cash now is a big mistake.
OP is giving up a safety net and opportunity cost of the $25k by paying off the car loan early.
Though car loan rate is lower, the term is probably a lot shorter than the 30 year home loan.. Which means she is probably paying a considerable amount of her disposable income in present day to the car.
One the other hand, the home loan is spread over 30 years. Her present day payments will be much lower, and that means she would have a lot more she can do today to make her money grow, because she’ll have more to work with today. Not to mention as she makes her payments, years later, the dollar will have considerably depreciated…
Also ,while it’s been proven that a home loan is dischargeable in a forclosure, I’m not so sure a car loan is as easily forgiven, even if the car is repossessed (sorry, never took out a car loan myself). And reality is that, in CA you can probably live with owning a home. But it would be really really hard to get around without a car (which for most purposes is a necessity in so-cal)… So if the crap hits the fan, personally I would rather lose my house than lose my transportation….
I think if the OP thinks the can beat the 3.875 in an investment product(s) consistently year after year, than she would be better served pushing as much of her debt as far out as possible. If on the other hand, she doesn’t feel she can, beat 3.875 but can beat 2.69 consistently year after year, then she probably should keep both of her loans…And if she feels she can’t even beat 2.69, then she probably should just pay off the loan, assuming she has sufficient safety cushion/emergency fund.
But in reality is, something less than 3% probably doesn’t make *that* much of a difference to really warrant paying it off early.
