<prompt> Human: A little background. Mid thirties, married, and financially secure. We are about to receive 8k from VW for the diesel-gate debacle. We are going to replace this environmental sin-mobile with a 16k used car. Our credit union will finance this car at 1.99 for 48mo. When its all said and done we will have paid the bank 700 in interest for this loan. The question we are pondering is should we take this 8k and drop it on the car loan and reduce the overall interest paid to the bank down to 350ish wives idea, or should we take this 8k and drop it into the market is some low cost index fund such as vanguard my idea. As I mentioned earlier, we are not hard up for cash so lowering my monthly car payment isnt going to improve our life all that much. I feel that investing this 8k is a better use of this money. In theory, getting a 7 return on this 8k should result in roughly 2500 in profit after the 48mo term of the loan. Even after paying capital gains tax we should turn a decent profit on this investment. Does anyone have an opinion as to which option is better? Additionally, if you were to invest this money, would you diversify it putting some portion in an index fund and some in bonds, or would you solely invest it in an index fund?  <response>: I dont think it will , but the market could go to hell and take your 8k with it for who knows how long. On the other hand, your debt will not go away no matter what the market does. Pay down the debt , put the payment reduction you realize per month into a 401k if your employer offers one, and enroll in the advice product if your plan offers it. Or consider an IRA if a 401k is not available. 