*The Dave Ramsey 'Baby Steps' Thread*

[WDW_fan_in_TX]

I'm not sure what amorazation means, but I will check it out. I'm thinking about refinancing or even getting rid of the car. I've already been offered $10,500 by 3-4 different dealers on KBB.

Punch your numbers into a calculator like this and see the amortization schedule:
https://www.bankrate.com/loans/auto-loans/auto-loan-calculator/

I find amortization schedules like that motivating because you can see the impact of a relatively small amount $215 which, if applied to principal, would cut a full month off your loan.

 

[ThereYouSeeHer]

I'm not sure what amorazation means, but I will check it out. I'm thinking about refinancing or even getting rid of the car. I've already been offered $10,500 by 3-4 different dealers on KBB.

An amortization schedule is just a table that shows you how each month's payment is being split between interest and principal. If you put in your original loan information, it will also show how much total interest you will pay over time. Using some rough numbers, here's an example:

 

[CoP Luv]

I'm not sure what amorazation means, but I will check it out. I'm thinking about refinancing or even getting rid of the car. I've already been offered $10,500 by 3-4 different dealers on KBB.

I'm doing some research on my car payments right now. I pay $505/month for a 2016 Ford Fusion. I originally got the car in November 2022 for $19,900, and I still owe $15,200 on it. In the last 3 months, I've made payments of $505. Of that total, over $285 has gone to interest while less than $215 have gone to actual principal. I can't find anywhere on the website to pay only principal. And I don't know why they don't put more to principal. How am I ever going to pay it down? I'm going to be paying interest for years at this rate. It looks like they'd put more toward principal so they could get rid of me. But anyway, it's frustrating.

I have paid 33 months on it. I owe 39 more months.

While it would be great to get out from under your high interest car loan, where would you come up with the additional money to pay it off once you sell it for $10,500? You would still need to pay an additional $5,000 - ish to pay off your loan.

Amortization in this instance means the process of paying down an assets' debt. An amortization calculator shows the total payment owed and which part of that payment goes to the principal and which part goes to the interest. It can also calculate and show you different scenarios if you make extra payments. You may have 39 months left, but once you get rid of your credit cards and put the extra $60/month toward your car (making the payment $565 each month), you can see that you may be able to pay it off early, and as a result pay less interest each month.

It is a company's best interest TO THEM of you to have high interest and not pay it off early. That's how they make money. So no, the car loan company would not love to get rid of you. They would rather you pay them interest (and not principal) each month. Interest is calculated based on your rate and is not some arbitrary number. Once the interest is paid to the loan company first, then anything left over goes to principal.

As far as your trip is concerned, and I know you have paid off the flights and room, do you have a line item in your budget for travel? Or are any expenses incurred just going to be a surprise?

 

[firefly_ris]

While it would be great to get out from under your high interest car loan, where would you come up with the additional money to pay it off once you sell it for $10,500? You would still need to pay an additional $5,000 - ish to pay off your loan.

He could take out a personal loan at a lower interest rate than the car loan which if I'm remembering right is very high. Then whatever the difference is that he is saving, throw at the credit cards and rebuild E-Fund. Deal with a single car with wife for a while then after the cards and car loan are paid off, get a $4000 older used sedan like an old Corolla or Civic that will last him 2-3 years while he continues building up funds. Not a perfect solution by any means but could free up some cash each month and remove an underwater debt on a depreciating asset while the car is still worth at least something.

 

[Turn the Page]

It sounds like the Baby Steps would be perfect for your situation!

Hopefully, you were able to use the $6000 as a down payment for the car or to pay down other debts. What a great snowball starter!

Also, don't worry about the mortgage yet (that's years down the road after eliminating debt, getting a full emergency fund, investing, and saving for college). Even when you would reach Baby Step 6, remember it's not choosing between investing or paying down the mortgage, it's both! So you would still be able to have 15% of your gross income pulling those great returns, and then some other amount would start snowballing your mortgage. The good news is, with a lower interest rate, a greater portion of your extra payments would go towards mortgage principal instead of interest (and work that much harder for you)!

Well yes, we knew the old car was getting close so we had been saving a down payment for the new car. I stated that we weren't worried about paying off the mortgage just yet. And we already have 16% or so going into investment accounts.

We are doing the baby steps out of order.