How we dripped our way out of debt
After reading NoCreditNeeded’s article titled “Drip, Drip, Drip Your Way Out of Debt“, I got to wondering “How much interest did we save by paying off our Malibu almost 4 years early?”
I hopped on over to the Bankrate Auto Loan Calculator and plugged in the following information:
Loan Amount: $25,000
Interest Rate: 5.95%
Term: 72 months (6 years)
I then ran the numbers and checked out the amortization table for the loan:
- As of June, 2007, I should have paid about $2800 in interest
- For the entire loan, had I only paid the minimum payment, I would have paid almost $4800 in total interest!
- Therefore, I saved at least $2,000 in interest by paying off early
I say “at least $2,000”, because since I paid an amortized loan off early, I actually paid less than the $2800 in interest. I really don’t know how much I paid, but I do know that at most, this car purchase, with negative equity, interest, taxes, tags, etc., cost us almost $30,000! How stupid! And this was for a cheap, plastic, 4-cylinder Chevy Malibu! We could have kept our gas-guzzling VW Passat GLX, with its premium fuel requirement, and saved the $8,000 we lost on the trade-in.
But we didn’t, and we have to live with that stupid, stupid mistake from two and a half years ago. But now the loan is paid off, and we’re moving onto our next debt…
$10,000 in credit card debt!!!
YAY! Now you own the car free and clear! 🙂
Also remember that you gain the cash flow from the time you paid off your loan to when the loan would have ended. This cash flow can be used to save you more interest, or even earn interest.
I’m assuming you wanted to pay off your car loan before the credit card debt because your credit card debt has a smaller interest rate (0%) right?
Or is your decision a more emotional one since you thought buying that car was a mistake and you want to get that out of your mind first?
MoneyNing, I actually have a post already scheduled for tomorrow to discuss just that topic!