Car payment advice.

[jsbush]

I'm currently paying $165 a month on my car (I got 40months left to pay). I was thinking of paying $400 a month till the next school year, and bring my premium back down to $165 because i'm going back to school in september. If I do it this way, I won't be able to save up much money for school and I will be even tighter in my money. But I would have a year less to pay on my car (6.8% interest). Or I could keep paying $165 a month till I pay off my car, and save up the extra money this year and put it towards school next year.

In september I will be having to pay for my car and an aparment (currently living with my parents). Which I will be taking out a gouverment loan which you don't have to pay back till the end of your schooling, and you have 5 years to pay it off interest free.

Any ideas on what I should do?

Option 1: Start paying $400 a month for my car, and go back to $165 I start school.
Option 2: Stay at $165 a month and finish the 48 month term as was orginally planed, and put the extra money away.

Any other sugestions?

 

[Viper GTS]

By knocking down the principal now, your car payment will be less than $165... Either that or you will get a nice refund once you pay it off, for interest that you didn't need to pay.

Viper GTS

 

[ragazzo]

option 1 will save you money in the long run.

 

[EagleKeeper]

If you have the disapline to not touch it, salt the $$ away.

Else pay down the car so you do not have to pay the extra $$$ later on. Make sure that who ever is financing the car adjusts the balance owed to reflect the extra payments and less total interest on the loan.

 

[Quixfire]

Split the differance and do both.

 

[vi edit]

Originally posted by: Viper GTS
By knocking down the principal now, your car payment will be less than $165... Either that or you will get a nice refund once you pay it off, for interest that you didn't need to pay.

Viper GTS

Not unless he has one of the very rare types of loans that automatically readjust payment amounts. Very, very few loans do this. Most convential loans will keep the same payment amounts till the end of the loan. The only way to lower the payment amount is to refinance the amount of the loan.

 

[Viper GTS]

Originally posted by: vi_edit

Originally posted by: Viper GTS
By knocking down the principal now, your car payment will be less than $165... Either that or you will get a nice refund once you pay it off, for interest that you didn't need to pay.

Viper GTS

Not unless he has one of the very rare types of loans that automatically readjust payment amounts. Very, very few loans do this. Most convential loans will keep the same payment amounts till the end of the loan. The only way to lower the payment amount is to refinance the amount of the loan.

In which case he would get a refund (presuming he continued paying the full $165 and paid the loan off early).

Viper GTS

 

[jsbush]

My plan with Option 1 was being able to pay off my loan early so I could save on the interest.

 

[vi edit]

Refund? If he pays an extra $250 a month twords principal, then all he does is reduce the amount of interest he'll pay. He'll get no money back. Just save a couple hundred bucks (if that) in interest.

 

[Scarpozzi]

Option 1.....if you pay off enough of the loan, you can always refinance somewhere and maybe even knock your payments down hella low.

Option 2 is the one I would use if you don't know what your financial future is going to be like. If you don't know about job security, it's always good to have some cash stashed away to make those payments when the chips are down.

 

[MattCo]

My car loan is set up that way. I made a couple of double payments thinking I would pay it off a few months earlier. The next time I got payment coupons the number of months remained the same, just the monthly amount was much less.

-MC

 

[jsbush]

I'll stick with my orignal payments. That way I will be able to save up a lot more, and only lose about 300$ of intrest.

 

[RossMAN]

Option 1, pay off as much $ as fast as you can, do it.

Benefits would be, you wouldn't owe $165 a month anymore, your credit would show a PAIDOFF car loan in good standing which definitely helps your credit and credit score (since you have less overall outstanding debt), also since your car is PAIDOFF in full and you have the car title you don't have to keep FULL coverage insurance with comp & collision.

As vi_edit mentioned you could have a rare (but they still do them) rule of 78ths loan, if you do ... then I dunno.

But there's a good 99.99% chance that you have a regular typical simple interest loan which means ... you only pay interest as you go, so if you pay off your loan in 2 yrs then you only pay 2 yrs of interest instead of 4 yrs. There is no "refund" of finance charge unless you overpaid which I doubt will happen since you should call your bank for a payoff quote when you are near the end.

40 months is a long time for me, 3 years 4 months ouch! I'd rather pay it off as quickly as possible and get it off my shoulders ... use that money towards car insurance or stickers to make it so super hella mad crazy fast!

 

[bigshooter]

make sure if you make a big payment it doesn't apply towards future payments, some banks dont apply the extra to principle. some of them just apply it to future payments so they dont lose the interest.