All my single college years I was saving money to buy a new/used car less than 5 years old. In May 2010 I graduated and got married. By August 2010 we bought a Honda 2007! We only had a couple thousand saved up for a down payment; so we still needed a 5 year loan.
I was determined NOT to take that long to pay it off. So I made plans…
How to Pay Off the Car FAST
I made my basic $250 payment each month. Pay your car payment EVERY month! Getting behind in your payment will NOT save you money, NOR allow you to pay off your car fast. Keep up with the payments EVERY month!
I opened up a new bank account with the SAME bank we had the loan with. Each of my paychecks, which were bi-monthly, I had work take $125 out and put in my bank account (same account as the loan). This allowed us enough to make double payments on my car each month. By having the money out of our pay check, we didn’t feel like it was coming out of our pocket because we didn’t “see it”.
Tricking the brain is the BEST way to save money and stay out of debt.
Now, the trick to “How to Pay Off the Car Fast” is….Making Double payments EVERY MONTH with the extra money you are setting aside.
2 Options for your double payments, both have great benefits:
- Put the extra $250 to principle… Which is what most financial people tell you because then you don’t pay as much interest, thus saving you money in the long run. It’s a frugal living trick. This is a great option because you save money in the long run.
- Make an extra payment. So not putting the $250 to principle, but making your regular $250 payment. This allows you a cushion in case an emergency comes up.
For Example: If you are 3 months ahead on your car payment (since you’ve been making double payments), you can technically skip 3 months worth of payments and use that money directed to other needs, in case of a financial emergency.
This is a great option as well, because it allows you to plan for emergencies. If you don’t have an emergency fund, this can be your “cushion”. You don’t have to spend $250 (or technically $500 since you have the other money in your account) that money, and can use it for an emergency. OR, just use the $250 for the emergency, and keep up with your payments from your “extra” cash from the pay checks.
What We Did
I choose I get 6 months ahead in payments first. This allowed us a “cushion” for emergencies, especially since we didn’t have a ton of money in savings, or an emergency fund at the time. THEN, I started putting it all to principle; allowing us to pay LESS interest and pay it off quicker!
I didn’t start using this technique until we were already 6 months into the loan. If we started right off the bat, we would have SAVED more, AND paid it off even quicker!
Having the extra payments taken out of my check before getting paid allowed me to make double payments without feeling like I was taking it out if my budget.
Paying off our car was a HUGE help in allowing us to start saving again for a down payment for a house! It allowed us to save an extra $250-500 each month!
Getting your finances under control can make a huge difference in your life and relationships. Stressing about money can be difficult.
Learning how to budget allows you to be free financially.
***Just a tip… if you finish paying off one debt… KEEP taking that money out and put it towards another debt OR into savings! Since you are already “missing” the money, you won’t notice the difference whether it goes to more debt or savings. It’s a FAST way to build your savings as soon as you have paid off debt.***
Whats a trick you use to pay off debt?
If you liked this post, please let us know by leaving a comment below and clicking those share buttons to tell your friends. As always, we appreciate you taking a minute of your time to spread the word about preparedness.
This post may contain affiliate links. Read my affiliate link disclosure here