Paying off a car sooner?

[xMoneyMakerx]

Hi, I needed advice as to what would be the best way to pay off a car sooner. I bought a car and owe $9,000.00 with about 31 payments left. I am a poor college student, would even sending as little as $100.00 extra a month make a difference? Sorry if this is a dumb question but I don't know much about finances. Any info will be greatly appreciated! Thanks!

[Ima saver]

I don't know if the company that you have your car financed thru, is set up to handle extra payments. You need to find out. What I do is set up an account within my savings account, earmarked car acct. Put that extra $100 and any other you can find into it, and pay the car off early when you save the needed amount.

[poundwise]

Of course! $100 a month will make a very real difference. How much depends on what your interest rate is, etc.

And no, I'm sorry that I disagree with Ima on this, but it is far better to send in extra with each payment than it is to save up money for a payoff. The reason being that you will likely save a great deal in interest over the remaining time that it takes you to pay the loan off.

[xMoneyMakerx]

I pay 340.00 a month and the interest rate is at 12%

[poundwise]

Then clearly, sending extra with each montly payment will benefit you. If you can send in $100 extra a month, you'll make significant progress v. paying the regular payment only.

[wwjdmsl]

A thought/idea-

Sell it....there are good, dependable vehicles out there for half of that....just bought my son one of the most dependable cars I have ever seen and it was 2600.00. One owner, low miles, you can start with that, then save and get to a point where you dont have to finance a vehicle.

[Ima saver]

I agree with you poundwise, about sending the extra money with the payment. I just did not know if the lender was set up to take the extra money or not!

[lrjohnson]

There are many people on this board much savvier than I with number crunching, and they can give the best "financial" answer.

If I had payments on a car, I'd make sure I had an emergency fund first, then I'd pay off the debt as quickly as I could, then I'd put that same money, if I didn't need it for other debts, into a replacement car fund so I wouldn't need a loan for the next one.

[poundwise]

True. If you could sell it and then obtain another vehicle without a loan at all that would be tremendous. That sounds like a Dave Ramsey solution from wwjdmsl.

Of course, one problem will be selling a vehicle that you are 'upside-down' in, which you likely are at this stage of ownership. Still, it may be worth a shot.

If you are determined to keep the vehicle, then the additional payment route is certainly going to prove better than simply making the remaining payments; especially at that interest rate.

[poundwise]

Originally Posted by Ima saver

I agree with you poundwise, about sending the extra money with the payment. I just did not know if the lender was set up to take the extra money or not!

I see. Understood.

[xMoneyMakerx]

Wow, that great I thought maybe $100.00 was too little, thanks for you great advice everyone. Gotta get back to work!

[Broken Arrow]

I know it sounds silly, but my last car loan was in simple, not compound interest. In which case, paying it off early doesn't save you any more money than making minimal payments. However, I still paid my car off early if only because it relieved that much more pressure from my overall monthly bills.

[slimcustomer]

I would check out refinancing to a lower rate if possible. Here's a resource on Fatwallet - link that might help . Many credit unions will also pay you cash back to refi your loan at a lower rate as well. You might be able to find a 36 month loan at 2.99% depending on your credit score and other factors.

[puck36]

$100 extra is ok but you have to ask the finance company if they will take it. I have a loan with GMAC and was told that I could send in extra payments but they have to be the same amount as my monthly payment. So if your payment is $290.32 then your extra payments might have to be just that. Other option is to put that $100 or any extra money into savings and then write a check when you have enough to pay it off. Thats what I'm doing. I'm making my monthly payments and saving all extra money into a savings account and then on June 16 I'll write one check to pay off my car.

[poundwise]

So, to summarize the above:


1) You can sell the vehicle and buy a less expensive one outright

or

2) You can try to refinance the vehicle to get a lower interest rate

and/or

3) You can send in an extra $100 with your payment (provided that the lender will accept it)

or

4) You can save an extra $100 in a 'car payoff' savings fund (in the event that the lender will not)


One additional note I'd add at this point. If you do refinance the vehicle do so with a lender that will definitely let you send in extra payment in any amount. Then, pay the payment you are paying now plus $100 a month instead of whatever payment the new lender asks for. That should give you the greatest traction to reach payoff.

[abowers]

My new car payments are $265/month with a 4.9% interest rate. I've been sending in just an extra $20-25/month since we financed the car in October. My minimum due is dropping every month, but I continue to send in the same amount, so that in a few months I'll be ahead by a payment. They take whatever money I send them. This is with Ford, by the way.

[Tree0164]

You can send in extra each month. I have a monthly car payment of $244 but I pay $300 each month towards it and I will end up paying it off about 6 months earlier.

[xMoneyMakerx]

Cool, If I would've known this before I would be way ahead in payments, I always figured I had to give large amounts extra for it to make a difference. I am now motivated to paying off my car sooner. THANKS EVERYONE!

[xMoneyMakerx]

o.k. I had another questions regarding extra payments, but didn't know if I should start a new thread or not. Anyway, I have my car financed with ford credit and have been using e-bill to pay my monthly bill. My question was how do I give extra payments with e-bill? or should I just mail in the extra payment? Any info will be greatly appreciated! Thanks!

[Broken Arrow]

Are there any fine print or FAQ articles available on the website? My student loan website has it, and it involves me doing nothing more than transferring an amount larger than the minimum.