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can someone run these numbers?

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Anonymous
Not applicable

can someone run these numbers?

So I am trying to figure out how to pay our vehicle off early, the interest rate is rediculous and even though our credit is much better than before our vehicle is too old to refinance for a better rate. I have tried running the numbers through online calculators, and they really dont make sense to me..any math experts out there wanna help me figure out how soon adnd how much I could save paying my loan off early? I cant even really figure out how many more months are left to pay, my statement doesnt show it and math was never my favorite subject!!!

 

Here is the info:

balance $8,732.24
interst 13% (I know this is crazy high..we were young and stupid!!)
loan origination 10/28/2006

original loan amnt: $18,840.26
pmnt 465.39

 

What I can do:

I know I can add at least another 200/mo to the payment each month

I also can pay a 2000.00 lump sum to get balance down.

I am really just trying to figure out if it is worth it to do this or not?

Thanks sooooooo much!!!!

Message 1 of 8
7 REPLIES 7
codedoctor
Valued Member

Re: can someone run these numbers?

I can't match the payment ($465.39) to a realistic (integer) number of terms based on 13% interest rate and the principal amount of $18,840.26. This calculates to around 53.5 months, which does not sound correct.

 

What was the number of payments to be?

 

I played around with some numbers; I assumed a 60 month note. Based on my sample numbers the total interest on the original loan would be $6880. By paying $2000 now the term reduces to about 53 months with total interest around $5992. By making extra payments of $200, the term reduces to around 46 months and total interest paid is $5772. By paying $1600 now and additional $200 payments the term reduces to 43 months and total interest is $5393.

 

The important issue is whether you can make these extra payments under the terms of the note, and how they apply additional payments and how interest is calculated if the note is paid off early. My calculations are based on compound interest just as for a home mortgage. If the car note refers to something like interest to be accrued by Rule of 78's, then it's a whole 'nother ball game (one not in your benefit).

 

BTW, 13% is awfully high, but not as high was 20% and even higher than some people are paying.

Message 2 of 8
Anonymous
Not applicable

Re: can someone run these numbers?

Do you have any new CC's that offer low rate BT's such as PenFed?  PenFed has a 2.99% BT for life of transfer.  PSECU has 3.9% till end of 2010.  Other CC's have rates as low as 5.24% standard rate.

 

There are personal loans that range from 7% to 10%.

 

Paying the car down faster and adding extra each month is a good idea to get out from under it and minimize interest.

 

However, my question is:  how much emergency savings do you have currently?  If it is less than 3 months, I wouldn't pay anything extra, I would build cash till you have at least 3 months, then begin paying extra toward the note.  Ideally you want at least 6 months in case of financial setbacks, job loss, medical issues, etc.  You really need a cushion.

 

So, make sure you have emergency funds and then talk to a CU about a personal loan or CC with a low rate that you could transfer the car note balance to.  By cutting 4 to 6% off the APR you could dedicate the difference to pay off.

 

 

Message 3 of 8
Anonymous
Not applicable

Re: can someone run these numbers?

yes that is where I am getting mixed up, I can't get the numbers to compute correctly with the monthly payment We have never ever been late so it's not like there is late fees or anything added into it. It sounds horrible, but I cant remember whether it was 48 or 60. This loan is through our bank that we bank with regularly, so I will have to call and find out why the numbers don't mesh. Now that I think of it though i seem to recall my husband squaring off with the auto guy saying he wasn't gonna finance a vehicle fo 60 month....maybe they met in the middle and did 54 months that would be 4.5 years instead of 5?

Thanks!!!

Message 4 of 8
Anonymous
Not applicable

Re: can someone run these numbers?

we have $4500.00 in savings. Right now after bills (including groceries,gas etc) we have around 1200 per month left over that I want to save or put toward paying off this horrible loan. We do have credit cards, but finally got those paid off and I really hate to charge on them, you are right though that a lower interst rate would really help!
Message 5 of 8
Anonymous
Not applicable

Re: can someone run these numbers?

IMO, $4500 is not adequate emergency.  Take your monthly burn rate and then save 4 to 6 times that.  I suppose if you somehow know your income cannot be interrupted and job is totally secure (contract, tenure, etc) then you might do half and half.

 

But having a car paid off, but cashless when financial issues arise is your least worry.

 

 

Message 6 of 8
Anonymous
Not applicable

Re: can someone run these numbers?

13% is high but not onerous.

 

As has been said you would be better served making an extra amount to a monthly payment and banking more money to build your reserves up. If the car "dies" before you pay it off you have money in the bank to pay it off and put down a downpayment.

 

Things are NOT footloose and fancy free in the economy yet, saving more money is your best bet.

 

 

Message Edited by usmc58555 on 08-25-2009 05:54 PM
Message 7 of 8
Anonymous
Not applicable

Re: can someone run these numbers?

Thanks for all the advice. Times are uncertain, DH does have the security that if his job was cut, he can acess seniority on a lower level, so I'd like to say we feel his job is secure or at least there is a backup, but nothing is guarenteed in life. I think we will continue to save a few more months, but I am going to start adding an extra payment every month, normally we get a refund for taxes, not huge but something so I will designate that to pay down the loan too. My biggest thing is that I don't want to be in debt to anyone! for us, if this car dies, and we need a new one we will be buying a clunker that we can pay for outright.
Message 8 of 8
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