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next month I will be receiving about 2K in cash from an old insurance claim. I currently have about 2 more years to go on my car payments of $218 a month. I wanted to use the 2k toward my car but I was wondering if it'd be better to just make like a bunch of advance car payments & the continue to make my monthly payments every month so the car will be paid off faster or to just make one large payment toward the principle (I checked and yes I can do that with no penalty).
I was thinking of maybe a mixture of both, paying the next three months and then using the rest to apply toward the principle...I just wanna do whatever makes the most financial sense in the long-run.
Depending on exactly what you mean there may not be much of a difference.
You want to make sure if you apply this money toward your car, it goes to reducing principle and not "paying ahead", i.e. letting you skip a payment if needed down the line.
You want it so that your balance is immediately reduced by $2K and then you continue making your same monthly payment for the same amount that you normally would. This will allow you to not only be done with your loan sooner, but also pay less interest over the (now-reduced) life of the loan.
So do it all at once now, and make sure they understand this all goes to "additional principle."
You ow $2616 in payments to come. Likely 3-4% interest rate?
Make lump sum payment, as in - all of that cash. Leftover balance, pay off in 2 months payments.
NEVER AGAIN BUY CAR THROUGH LOAN. Learn how to be financially independent.
He said 2 more years, not 1. So he is on track to pay $5,232 more w/o a lump sum payment.
Honestly, if you have 2 years left, and let's say a 5K balance @ 4% (which will land you at your $218 payment), you're only going to save $128 in interest by putting down 2K now. Of course you'll be done in only 15 months instead of 24 (keeping the rest of your monthly payments the same), so it's nice to have that freedom feeling sooner than later.
Now if it's a $4,650 balance at 12% (also around 218/mo), you'd save $400 in interest...
You ow $2616 in payments to come. Likely 3-4% interest rate?
Make lump sum payment, as in - all of that cash. Leftover balance, pay off in 2 months payments.
NEVER AGAIN BUY CAR THROUGH LOAN. Learn how to be financially independent.
I needed to finance the car to establish some credit. Apparently the one credit credit I have that carries a low balance isn't doing enough for my credit score. My prev car was purchased by my father so I don't have anything in my name to vouch for my credit worthiness.
When I called today they told me that because I always pay a little more (I try to pay at least $225 -250) I currently owe $4,158 on the car so I'm gonna go head and put the 2K toward the principle. I figure if I do that I can have the car paid off in less than a year. This will be the first car I purchased and paid off without help from my parents...I'm kinda excited about that
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