At first glance paying down a 3.5% loan instead of a 1% loan would seem like an obvious choice but it is more complex than that since the loans also impact your cash flow and future loans that you might need.
Part of the problem is that you don't know what interest rates will be in five or ten years so you could be paying more than 3.5% for future car loans if you don't have enough to pay cash when you need to buy your next car.
If you can get "one car ahead" and keep saving your "car payment" to pay cash for future cars then getting a car loan paid off is something that you will only have to do once in your life.
I once worked with a guy that was in his 60's and he had just bought a new car, in talking with him it came out that he and his wife had almost always had one or two car loans for the last 40 years. If you don't want to be like that guy then you might as well get "one car ahead" sooner rather than later. Not having car payments when your kids are in college will make paying some of the college expenses out of your cash flow easier to do.
A lot of what to do depends on your personal preferences but in your situation I would even prioritized getting the car paid off over paying down the mortgage faster. You have;
1) $440 car payment
2) $600 student loan payment
3) $388 mortgage prepayment
Which combined is $1,428 a month that you could use to pay off the car loan quickly.
You would need to figure out your own numbers but after the car is paid off you could then maybe put $250(??) a month into a seperate car fund to be able to pay cash for your next car when it is eventually needed and then then use the rest to prepay the mortgage.
Investing.Newbie wrote: ↑Fri Apr 13, 2018 4:19 pm
We have around 5 months emergency fund.
Not having a car loan will also help your cash flow if something happens like a layoff or some other big expense. For example if you want six months expenses in your emergency fund then you would need an extra $2,640 (6x440) in your emergency fund to cover the car payment for six months in an emergency.