Making extra payments on car loan question (paying, rates, charge)
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Depends on the financial institution I suppose, for loans I have had with my Credit Union, as I paid more than the minimum payment the next due date would be pushed out and if you kept paying monthly, interest would minimize as well as well as the payment not being due for months...
Depends on the financial institution I suppose, for loans I have had with my Credit Union, as I paid more than the minimum payment the next due date would be pushed out and if you kept paying monthly, interest would minimize as well as well as the payment not being due for months...
It may not be directly related but it just does not make any sense to finance a vehicle. Why pay interest on a depreciable item?
If the financial situation is not so good then the buyer should buy less car, its that simple. If you can't afford to pay cash for a vehicle then you can't afford that car.
It may not be directly related but it just does not make any sense to finance a vehicle. Why pay interest on a depreciable item?
If the financial situation is not so good then the buyer should buy less car, its that simple. If you can't afford to pay cash for a vehicle then you can't afford that car.
My parents have bought several cars over the years at 0% or 0.9% interest. At that point, why NOT finance them? It leaves you more cash free for investment opportunities.
Personally I would rather finance a new car at a low rate, than buy someone else's problem and spend my money fixing it for years.
On a typical car loan, any payments made in excess of the monthly minimum payment reduce the principal, and since the principal accrues interest each month, lowering the principal reduces that interest and the life of the loan. It makes no sense to save up to apply a larger payment to the principal unless you are earning a higher percentage of interest on the savings than you are paying on the car loan. You shouldn't pay more than the minimum payment if you have other loans (credit cards, etc.) that are at a higher interest rate than the car loan, or if you have insufficient savings for emergencies (some recommend six months' living expenses, but that ties up a lot of cash).
My parents have bought several cars over the years at 0% or 0.9% interest. At that point, why NOT finance them? It leaves you more cash free for investment opportunities.
Personally I would rather finance a new car at a low rate, than buy someone else's problem and spend my money fixing it for years.
0% is good and if you going to save that cash to pay the 0.09% then make sure your ROI is higher then 1%.
Yes, I agree with you.
Buying a brand new car is a waste! First the two years will lose almost half its value. Let someone else take that hit. I usually buy cars that are 2-4 years old and are reliable like Honda.
On a typical car loan, any payments made in excess of the monthly minimum payment reduce the principal, and since the principal accrues interest each month, lowering the principal reduces that interest and the life of the loan. It makes no sense to save up to apply a larger payment to the principal unless you are earning a higher percentage of interest on the savings than you are paying on the car loan. You shouldn't pay more than the minimum payment if you have other loans (credit cards, etc.) that are at a higher interest rate than the car loan, or if you have insufficient savings for emergencies (some recommend six months' living expenses, but that ties up a lot of cash).
In this Economy, you should atleast have 6 months of emergency cash saved up and then think about buying other disposable items.
My parents have bought several cars over the years at 0% or 0.9% interest. At that point, why NOT finance them? It leaves you more cash free for investment opportunities.
Personally I would rather finance a new car at a low rate, than buy someone else's problem and spend my money fixing it for years.
0% is not a good rate. When a new car (even the ones with the best resale value) lose 60% of their value in the first four years of ownership, its a skid.
If any other investment did this, they would be up in arms but we love cars so much that we just take this on the chin. It's fascinating to me.
For the OP, if you want to get rid of the car sooner by paying it off, just send in the extra money. I used my online bill pay through my bank to pay off my wife's car early. I didn't have to use the "extra principle" box on a pay statement or anything like that, it was automatically calculated. You can usually track the payments online. Forget about the interest rate you are paying on the loan. Having a paid for car provides a level of insurance that transcends trying to gain leverage on the money. Sure, you could wait to send in the cash, but do you honestly have the discipline to sit on that money?
I would bet that a good portion of people that give that advice about leveraging the money somewhere else know that that works in theory but do not actually practice it.
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