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DARREN937
Posts: 1
Registered: ‎04-02-2013
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Best way to pay off auto loan.

Ok so I work 2 jobs one is my normal full time job. The second is just a minimum wage pizza job. I work the pizza job just to get the $100 weekly pay check that I put in a checking account I never use except to pay my car payment. The payment on the car is 237 I pay 350 a month. Now to the question. Should I pay 87.50 a week to the loan or just keep paying one 350.00 payment monthly?

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ImprovingYouth
Posts: 154
Registered: ‎09-21-2012
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Re: Best way to pay off auto loan.

[ Edited ]

IMO I would personally continue to save. You are paying extra on the loan as is, but the first thing to do when deciding where to allocate extra funds is establish a Emergency Savings/Nest Egg. This fund should account for all expenses for a 6-12 month period. Once you have this saved then by all means blast the loan out of the water :smileyvery-happy:

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SamsungHDTV
Posts: 566
Registered: ‎10-25-2011
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Re: Best way to pay off auto loan.


DARREN937 wrote:

Ok so I work 2 jobs one is my normal full time job. The second is just a minimum wage pizza job. I work the pizza job just to get the $100 weekly pay check that I put in a checking account I never use except to pay my car payment. The payment on the car is 237 I pay 350 a month. Now to the question. Should I pay 87.50 a week to the loan or just keep paying one 350.00 payment monthly?


improvingyouth is right especially if you live on your own. You can pay down that loan real fast how you're doing it, but if you can't work because you got hurt and had no money saved then your auto loan won't be paid for however long you're not working.

 

But to answer your question, and assuming you have 6 month expenses saved: its better to pay 87.50 weekly. Less interest accumulates because your loan is most likely compounded daily. But you have to be careful when you do this, because you want to make sure the extra money goes to principal payment and not your next month's regular payment. Lets say for example you blindly made weekly payments of 87.50:

 

Week 1: 237 - 87.50 = 149.50 remaining payment due

week 2: 149.50 - 87.50 = 62 remaining payment due

week 3: 62 - 87.50 = 62 towards regular payment, 25.5 to principal balance

week 4: 237 (next months payment due) - 75. You get the idea, it will go towards next month and you don't want that.

 

So be sure to ask your lender how to make a "principal reduction" payment. With my lender the only way I can achieve this is making one overpayment each month or coming into a branch. I couldn't do this online, which is a bummer. Otherwise you can do bi-monthly payments and it you wouldn't have to worry, although its not better than weekly payments.

 

Hope this helps.

I'm a personal banker and do a lot of auto loans serving the Houston area.
I suggest first time car buyers to read the sticky guide in the auto loan section.
I try to check these forums often, but if I missed your post, please feel free to message me with a link to it.

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