Paying the Car Loan Off
After getting my first auto loan I paid it off quickly by implementing a debt-pay-off strategy. I aggressively paid off my car loan by making additional payments and bi-weekly payments.
Additional Payments
For example, if you wanted to make two additional payments per year on a monthly car note that is $300, the term of the loan will be reduced by two months each year. As shown below:
The $300 car note payment multiplied by two is $600 for two cars note payments.
Then divide that $600 double car note payment by 12 which is $50.
By paying an additional $50 every month with the $300 car payment the new payment is $350.
Paying $350 every month opposed to the $300 equals two additional car note payments is made each year.
Bi-Weekly Payments
Using the previous example, instead of making a monthly payment of $350, make a payment of $175 every two weeks. Making bi-weekly payments as opposed to the monthly payments reduces the term of the loan by almost a year because the overall interest accumulating each month is reduced. The bi-weekly payments reduce the overall balances due quicker which decreases the amount of interest being charged.
By making both additional and bi-weekly payments, I was about to pay my auto loan off two years earlier than the term agreement indicated. I am still driving my Chevrolet Malibu payment free. I plan on driving my car until the wheels fall off. Then after the wheels fall off, I will put the wheels back on and keep driving my car until the engine falls out of the car. I received notices in the mail periodically requesting that I trade my car in for something shiny and new, but I won’t be trapped making those large payments again nor will I be conned into jumping back into debt, so I set those trade-in notices on fire. I lit a match and burned them over my kitchen sink. The goal was to own my car and not have eternal loan payments. Trading my car that I owned free and clear in for a car that I would have to make payments on is counterproductive because it would put me back in debt. The goal is to become debt-free and remain debt-free. The only way to remain debt-free is to stop accumulating debt.
What we learned:
How the making additional payments assist in paying down an auto loan.
How does making bi-weekly payments assist in paying down an auto loan.