Pay off car or not?

[barkley]

Alright, I did it! Paid off the car. Apparently, it was coming to $18.79 interest a day. When I looked at that, I said do it now! Not tomorrow and waste another $20! So all done. No more debt (ok, except the house but that’s life…monthly payments until I die) LOL

the house doesn't have to be 'for life'. i know it's likely a MUCH larger balance than what your car note was-but just for the heck of it, pull up a mortgage calculator on-line and see what happens to the time it takes to pay it off if instead of banking that $395 per month you were paying on the car-you pay it DIRECTLY TO PRINCIPLE ONLY. I'm guessing it will shave YEARS AND YEARS off the payoff (we did this with every spare penny we could come up with and paid off a 30 year home loan in 7).

p.s.-how do you figure you were paying $18.79 per day on interest alone? in order to do that your payment would have been over $560 per month just for the interest alone.

 

[georgina]

Nope, payment was $395/month. The car was brand new, and I was $4000 upside down in my old car so that was added to the loan amount

I was responding to a different poster who asked how to figure out their interest. (I quoted their post in my response)

 

[KittyKitty]

You might want to make extra monthly payments on the house. I found this web site that gives you an idea how much you would save in time and money. I used it myself to chip away at my mortgage. Now I am mortgage free!
http://www.bankrate.com/calculators/mortgages/mortgage-loan-payoff-calculator.aspx

 

[DawnM]

I am surprised paying all debts off wasn't the FIRST thing on your list, as well as paying down more than 20% on your house.

13% is a very high amount. We currently have a 1.9% loan and I don't even like that. We are paying it off by the end of the year (2 years vs. 5 years.)

What is your home loan rate?

 

[xlxo]

To clarify.... what is the make and model of the car? In general... you want to have a car paid off in 3 years.

German vehicles... you want to sell it after the warranty expires. Especially when you see maintenance charges surge.

 

[DawnM]

How do you figure out how much interest you are paying per month?

My original loan amount for my car was $15079.00; the Interest is at 2.29%; for a 6 year loan.

I may want to pay mine off as well...

It should be listed on your statement.

 

[LJSquishy]

Glad you paid it off! You should be proud of yourself and it will feel so much better not having to make that payment every month.

 

[DrummerBoy523]

Not sure what I want to do. How stupid am I?? I sold my house in August and make great off the sale. Bought a new place and was able to put the 20% down. Bought new appliances for the place, new furniture, new home décor, went to WDW, going on a cruise in January, treated myself to nice things (Michael Kors purses – my weakness). Have a nice little cushion to fall back on. So in my ‘home account’ I have a good chunk. Part of me wants to pay off my car (6 year loan that I’ve had for 2 years) I would save $395/month plus all the interest. I want to do it but then I think “Ahh, that will take out half of what I have left and it’s SOOOO nice to see those funds” LOL So question, what would you do? Would you pay off the car and say “hey, I have a good amount left anyways” or just keep paying the monthly payment from a paycheck

Would you borrow money and then put it in the bank? That is basically what you are doing. What's the balance on your car? If you can save $400/month how long will it take you to put that back in your savings? Pay that sucker off!!!!

 

[barkley]

You might want to make extra monthly payments on the house. I found this web site that gives you an idea how much you would save in time and money. I used it myself to chip away at my mortgage. Now I am mortgage free!
http://www.bankrate.com/calculators/mortgages/mortgage-loan-payoff-calculator.aspx

it's a great feeling isn't it? then it continues to feel good every month after payoff when instead of making your largest (for most folks) single payment per month to a mortgage company-you're making that payment to yourself

 

[Sagginit]

So I know you paid it off but to offer support I took out a car loan myself and had an interest rate that was much higher than I wanted and had to live with it for a few months. Basically I was offered a really good deal on a used car from a relative, but since it was older and I live in an urban area my insurance and interest rate was higher than average ( I think they figure if it has a higher chance of breaking down you have a higher chance of defaulting). Also since it was only 5K (I had about 10K in savings but I didn't want to gut my ER savings in case an ER came up right after) some places wouldn't even offer a loan of that much. I ended up getting a tax refund, bonus at work, and took what was going into savings to put towards the loan and got rid of it in just 3 months. I also had about 2-3 days to secure the loan so I went with my bank Wells Fargo... and well in light of what came out in the news recently I am not surprised if they were screwing me a bit on the interest I got offered and telling me it was the best deal I would get.

Did you by chance actually have a personal loan? I had 2-3 places offer that when I looked for quotes in place of a car loan as the amount was below their car loan threshold. They came with extremely high interest rates comparably so I am wondering if you may have gone that route thinking it was a "personal car loan". Lastly the bank did a terrible job of explaining the loan terms in person, the person who went over my paperwork had removed some of the pages with the terms and kept them in an envelope off the desk that I was given later, she just gave me a few sheets that required my signature, telling me the rest was duplicates to go home with me. I could honestly see how you would miss something if you had a rush job like me, it was a huge lesson I learned. My next loan will be a mortgage so I am going to research that for months before we even start looking.

PS that bank that gave me terrible and misleading service about the loan was none other than wells fargo lol.

 

[tvguy]

the house doesn't have to be 'for life'. i know it's likely a MUCH larger balance than what your car note was-but just for the heck of it, pull up a mortgage calculator on-line and see what happens to the time it takes to pay it off if instead of banking that $395 per month you were paying on the car-you pay it DIRECTLY TO PRINCIPLE ONLY. I'm guessing it will shave YEARS AND YEARS off the payoff (we did this with every spare penny we could come up with and paid off a 30 year home loan in 7)..

Exactly. We went with a 15 year mortgage, and even with refinancing twice to new 15 year mortgages, an extra $100 a month meant our house was paid off in 17 years.
We took a LOT of heat from our parents about having a mortgage in the first place. On both sides our parents bought VERY modest homes and paid cash, so we were the first to even have a mortgage. And we resisted the temptation to move up.

 

[Minnesota!]

I will say, about 10 years, we had poor credit due to many, many medical bills. Our interest rate was near 20% on our vehicle. We didn't have a choice but to take it. The payment SUCKED (I think it was $620/month, on a Toyota Sienna), but we did not have a choice. We paid that bad boy off as soon as we could.

Debt happens - I don't try and avoid it. I just try and minimize it.

 

[scrapquitler]

13%.

pay it off ASAP. That's a very high interest rate.

 

[Mackenzie Click-Mickelson]

On both sides our parents bought VERY modest homes and paid cash, so we were the first to even have a mortgage. And we resisted the temptation to move up.

What is a very modest home though? A lot of people's ability to buy a home with cash depends on their local area (home prices, appraisal amounts for property taxes, income made, neighborhood the home is in, etc).

 

[tvguy]

What is a very modest home though? A lot of people's ability to buy a home with cash depends on their local area (home prices, appraisal amounts for property taxes, income made, neighborhood the home is in, etc).

A very modest home?
For my parents, $2,500 in 1950. For a 1 bedroom 1 bath house on 5 acres in the country. Over the next 10 years they added 2 bedrooms and a bathroom on, doing almost all the work themselves and spending $2,000. My parents tax returns that year show combines gross income of $8,000 that year. They sold it in 1960 for $40,000, bought 2 new cars and a $29,500 3 bedroom 2 bath house much closer in on 1/2 acre. I sold that house 3 years ago for $556,000.

My In-laws.
$14,500 in 1973 for a 3 bedroom 2 bath 1,400 square foot house in Orange County Texas. But full disclosure, my FIL was career Air Force and had free base housing until he retired at age 43, so he had about 23 years to save to buy his retirement house. Zillow estimates it's value today at $89,000.

 

[shoney]

A very modest home?
For my parents, $2,500 in 1950. For a 1 bedroom 1 bath house on 5 acres in the country. Over the next 10 years they added 2 bedrooms and a bathroom on, doing almost all the work themselves and spending $2,000. My parents tax returns that year show combines gross income of $8,000 that year. They sold it in 1960 for $40,000, bought 2 new cars and a $29,500 3 bedroom 2 bath house much closer in on 1/2 acre. I sold that house 3 years ago for $556,000.

My In-laws.
$14,500 in 1973 for a 3 bedroom 2 bath 1,400 square foot house in Orange County Texas. But full disclosure, my FIL was career Air Force and had free base housing until he retired at age 43, so he had about 23 years to save to buy his retirement house. Zillow estimates it's value today at $89,000.

Wait...Am I reading this right? They bought a "modest" home for $2500 but had a tax return of $ 8,000.

That really doesn't happen now. People buy "modest" homes for 3x their annual salary or more!

 

[Mackenzie Click-Mickelson]

A very modest home?
For my parents, $2,500 in 1950. For a 1 bedroom 1 bath house on 5 acres in the country. Over the next 10 years they added 2 bedrooms and a bathroom on, doing almost all the work themselves and spending $2,000. My parents tax returns that year show combines gross income of $8,000 that year. They sold it in 1960 for $40,000, bought 2 new cars and a $29,500 3 bedroom 2 bath house much closer in on 1/2 acre. I sold that house 3 years ago for $556,000.

My In-laws.
$14,500 in 1973 for a 3 bedroom 2 bath 1,400 square foot house in Orange County Texas. But full disclosure, my FIL was career Air Force and had free base housing until he retired at age 43, so he had about 23 years to save to buy his retirement house. Zillow estimates it's value today at $89,000.

Oh ok I see.

I admire your parents (and that's awesome he could save all those years) and your in-laws. At least in my area it's more of a rarity to be able to buy a house with just cash nowadays unless you want to live in the not so nice areas (meaning one with higher crime rates and I'm not trying to be mean it's just the truth) or made a killing at selling your current home.

 

[mi*vida*loca]

.

 

[DawnM]

You might want to make extra monthly payments on the house. I found this web site that gives you an idea how much you would save in time and money. I used it myself to chip away at my mortgage. Now I am mortgage free!
http://www.bankrate.com/calculators/mortgages/mortgage-loan-payoff-calculator.aspx

I love playing around with bank rate.

I think we have 10 years left on our 15 year mortgage. We are ones who probably spent too much at the time, but are now ok. We moved to NC from SoCal and we were like kids in a candy store. It was so "cheap" here! hahaha!

In retrospect, a smaller/cheaper house would have been better and we could have prob. had it paid off by now.

 

[tvguy]

Wait...Am I reading this right? They bought a "modest" home for $2500 but had a tax return of $ 8,000.

That really doesn't happen now. People buy "modest" homes for 3x their annual salary or more!

True.