Best way to pay this car loan off?

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Topic Author
EricLThomp
Posts: 51
Joined: Tue Sep 18, 2018 10:10 pm

Best way to pay this car loan off?

Post by EricLThomp »

Below is what it's looking like now. We just throw money consistently at it every week. Should we let it build first, pay the actual required payment, and then pay another large chunk separate and apply towards principal only? Looks like they're taking out interest on just about every payment. Advice on how a true BOGLEHEAD would pay this off (it's a 36 month @ $574.84 monthly on the 20th)...Thanks!!

$1,205 paid so far
$62.69 in interest
Loan balance has decreased $1,017.26


10/4/2018 PAYMENT $140.00 $17,574.65
From: REGULAR SAVINGS (1)
To Principal: $138.55 To Interest: $1.45
----------------------------------------------------------
10/3/2018 PAYMENT $200.00 $17,713.20
From: REGULAR SAVINGS (1)
To Principal: $191.22 To Interest: $8.78
----------------------------------------------------------
9/30/2018 ADVANCE ($17.66) $17,904.42
To Principal: $17.66
----------------------------------------------------------
9/30/2018 ADVANCE ($43.84) $17,886.76
To Principal: $43.84
----------------------------------------------------------
9/27/2018 PAYMENT $120.00 $17,842.92
From: REGULAR SAVINGS (1)
To Principal: $109.71 To Interest: $10.29
----------------------------------------------------------
9/20/2018 PAYMENT $120.00 $17,952.63
From: REGULAR SAVINGS (1)
To Principal: $111.12 To Interest: $8.88
----------------------------------------------------------
9/14/2018 PAYMENT $200.00 $18,063.75
From: REGULAR SAVINGS (1)
To Principal: $198.50 To Interest: $1.50
----------------------------------------------------------
9/13/2018 PAYMENT $125.00 $18,262.25
From: REGULAR SAVINGS (1)
To Principal: $114.46 To Interest: $10.54
----------------------------------------------------------
9/6/2018 PAYMENT $100.00 $18,376.71
From: REGULAR SAVINGS (1)
To Principal: $89.41 To Interest: $10.59
----------------------------------------------------------
8/31/2018 ADVANCE ($18.22) $18,466.12
To Principal: $18.22
----------------------------------------------------------
8/31/2018 ADVANCE ($45.33) $18,447.90
To Principal: $45.33
----------------------------------------------------------
8/30/2018 PAYMENT $200.00 $18,402.57
From: REGULAR SAVINGS (1)
To Principal: $189.34 To Interest: $10.66
----------------------------------------------------------
8/24/2018 NEW LOAN-CHECK ($18,591.91) $18,591.91
To Principal: $18,591.91
----------------------------------------------------------
Last edited by EricLThomp on Tue Oct 09, 2018 1:26 pm, edited 1 time in total.
Leemiller
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Joined: Sat Jun 01, 2013 12:42 pm

Re: Best way to pay this car loan off?

Post by Leemiller »

My car company allows for online principal only payments. That seems to be an easy way to throw money at the loan to shorten the term.
Nissanzx1
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Re: Best way to pay this car loan off?

Post by Nissanzx1 »

From what I'm seeing it doesn't look like you have ever payed a full payment? Check that you aren't showing late right now.

Generally you must at least pay one full payment every month.
Topic Author
EricLThomp
Posts: 51
Joined: Tue Sep 18, 2018 10:10 pm

Re: Best way to pay this car loan off?

Post by EricLThomp »

Nissanzx1 wrote: Tue Oct 09, 2018 1:28 pm From what I'm seeing it doesn't look like you have ever payed a full payment? Check that you aren't showing late right now.

Generally you must at least pay one full payment every month.
No, it's showing a due date of 11/20 (skipping 10/20 according to them)
Mike Scott
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Re: Best way to pay this car loan off?

Post by Mike Scott »

Depending on the relative interest rates, I would be tempted to save up in a high interest account (keeping the liquidity) and then decide whether to pay off early or not when I had enough $$ to do the remainder. What's the total interest? How is your monthly cash flow and budget doing? Would the "extra" going to the loan be better invested elsewhere?
Mike Scott
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Re: Best way to pay this car loan off?

Post by Mike Scott »

It does look like the partial payments are being processed towards the next "regular" payment. Then any extra may be going to principle. I doubt the partial payments will reduce the total interest.
mortfree
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Re: Best way to pay this car loan off?

Post by mortfree »

all those payments and you really only paid $55 extra

$1205-($575*2 months)=$55

make the monthly payment and add a few extra dollars...

I'm surprised the loan company is even letting you make these small payments (No expertise, just my thoughts)
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Edie
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Re: Best way to pay this car loan off?

Post by Edie »

The interest should be the accrued interest from the last payment. If you make a payment of 500 dollars and the interest accrued is 12 dollars, your principal owed would go down by 488 dollars. You could alternatively make a payment of 100 dollars, the accrued interest would be 12 dollars and your principal owed would go down by 88 dollars, and then you could make a principal payment of 400, for a total principal reduction of 488 dollars. Same amount.

You can see this in the 9/27 payments. The interest accrued gets paid first, and remaining amount went to principal, then you made additional payments on 9/27, there was no interest accrued (since you'd already made payments that day), so the whole amount went to principal.

It depends on the interest you are paying on the car loan as to whether it's better to save up in a high interest account and pay it off in a big chunk, or to keep paying weekly like you are doing. I'm not going to debate whether you need the liquidity or not, I'm assuming you've already decided that piece.

I make whole payments on my note whenever the account has enough to make the payment (it's the only money going in and out of that account). That way I can see my required payment date move out farther (it's in February of next year currently, it goes out two months each month because I'm paying 2x required payment each month). I'm paying more in interest that way than if I was paying more frequently (slightly larger principal balance for a slightly longer time). If I was doing it in an account that had other funds going in and out of it, I would do it in the way that saved me the most in interest, but I'm fine with the approximately $300 in interest I will pay over the life of the loan.
Topic Author
EricLThomp
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Joined: Tue Sep 18, 2018 10:10 pm

Re: Best way to pay this car loan off?

Post by EricLThomp »

mortfree wrote: Tue Oct 09, 2018 1:40 pm all those payments and you really only paid $55 extra

$1205-($575*2 months)=$55

make the monthly payment and add a few extra dollars...

I'm surprised the loan company is even letting you make these small payments (No expertise, just my thoughts)
Well, technically, the loan originated at the end of August. There's only been one payment due and made....I've only had Septembers payment due. We aren't to October 20th yet, so I'm way ahead.
Topic Author
EricLThomp
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Re: Best way to pay this car loan off?

Post by EricLThomp »

OP here. Everything else is fully funded (401k, Roth, HSA, etc.) so not worried about this small amount of cash.

This is a credit union auto loan and I have an account there where money gets direct deposited in every 2 weeks from a small recurring side job, and weekly from my son who I'm selling another car to, so it's a convenient transaction to just roll these over to the car as they come in.
Last edited by EricLThomp on Tue Oct 09, 2018 2:18 pm, edited 1 time in total.
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dm200
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Re: Best way to pay this car loan off?

Post by dm200 »

As far as I know and from everything I have seen (I am in this business) - just making extra payments (of any amount) or including more with the regular payment reduces the interest you are charged and pays the loan off more quickly.

Here is just one example -

Suppose a car loan with 60 month term in the amount of $30,000 at an interest rate of 5.00%. Monthly payment is $566.14, interest would be $3,968.22 - if just the regular payments were paid on the monthly due date.

Now, suppose you paid $600.00 per month on this loan. You would then make 56 payments of $600.00 and a 57th payment of $110.27. Interest would be $3,710.73.
mortfree
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Re: Best way to pay this car loan off?

Post by mortfree »

EricLThomp wrote: Tue Oct 09, 2018 2:08 pm
mortfree wrote: Tue Oct 09, 2018 1:40 pm all those payments and you really only paid $55 extra

$1205-($575*2 months)=$55

make the monthly payment and add a few extra dollars...

I'm surprised the loan company is even letting you make these small payments (No expertise, just my thoughts)
Well, technically, the loan originated at the end of August. There's only been one payment due and made....I've only had Septembers payment due. We aren't to October 20th yet, so I'm way ahead.
Your Oct 20 payment became due on Sep 21. that is why they are not showing a payment due for Oct 20...

either way, seems like a fun exercise for some interest savings...
Topic Author
EricLThomp
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Joined: Tue Sep 18, 2018 10:10 pm

Re: Best way to pay this car loan off?

Post by EricLThomp »

dm200 wrote: Tue Oct 09, 2018 2:18 pm As far as I know and from everything I have seen (I am in this business) - just making extra payments (of any amount) or including more with the regular payment reduces the interest you are charged and pays the loan off more quickly.

Here is just one example -

Suppose a car loan with 60 month term in the amount of $30,000 at an interest rate of 5.00%. Monthly payment is $566.14, interest would be $3,968.22 - if just the regular payments were paid on the monthly due date.

Now, suppose you paid $600.00 per month on this loan. You would then make 56 payments of $600.00 and a 57th payment of $110.27. Interest would be $3,710.73.
But my point is will it make a difference if you pay that (instead of $600 on the due date only) as I am doing, say $100 here, $200 a week later, $100 the next week and so on..."a difference" meaning... in the speed of paying off the loan or how much interest you end up paying?
Topic Author
EricLThomp
Posts: 51
Joined: Tue Sep 18, 2018 10:10 pm

Re: Best way to pay this car loan off?

Post by EricLThomp »

mortfree wrote: Tue Oct 09, 2018 2:22 pm
EricLThomp wrote: Tue Oct 09, 2018 2:08 pm
mortfree wrote: Tue Oct 09, 2018 1:40 pm all those payments and you really only paid $55 extra

$1205-($575*2 months)=$55

make the monthly payment and add a few extra dollars...

I'm surprised the loan company is even letting you make these small payments (No expertise, just my thoughts)
Well, technically, the loan originated at the end of August. There's only been one payment due and made....I've only had Septembers payment due. We aren't to October 20th yet, so I'm way ahead.
Your Oct 20 payment became due on Sep 21. that is why they are not showing a payment due for Oct 20...

either way, seems like a fun exercise for some interest savings...
Meaning I had already paid enough to cover the October payment, so the next isn't due until 11/20?
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dm200
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Location: Washington DC area

Re: Best way to pay this car loan off?

Post by dm200 »

EricLThomp wrote: Tue Oct 09, 2018 2:23 pm
dm200 wrote: Tue Oct 09, 2018 2:18 pm As far as I know and from everything I have seen (I am in this business) - just making extra payments (of any amount) or including more with the regular payment reduces the interest you are charged and pays the loan off more quickly.
Here is just one example -
Suppose a car loan with 60 month term in the amount of $30,000 at an interest rate of 5.00%. Monthly payment is $566.14, interest would be $3,968.22 - if just the regular payments were paid on the monthly due date.
Now, suppose you paid $600.00 per month on this loan. You would then make 56 payments of $600.00 and a 57th payment of $110.27. Interest would be $3,710.73.
But my point is will it make a difference if you pay that (instead of $600 on the due date only) as I am doing, say $100 here, $200 a week later, $100 the next week and so on..."a difference" meaning... in the speed of paying off the loan or how much interest you end up paying?
Yes - speed (even one day) and amount paid both matter and affect total interest paid. The exact (to the penny) can vary a little bit - depending on which of the allowable interest calculation methods are used.
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dm200
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Re: Best way to pay this car loan off?

Post by dm200 »

dm200 wrote: Tue Oct 09, 2018 2:34 pm
EricLThomp wrote: Tue Oct 09, 2018 2:23 pm
dm200 wrote: Tue Oct 09, 2018 2:18 pm As far as I know and from everything I have seen (I am in this business) - just making extra payments (of any amount) or including more with the regular payment reduces the interest you are charged and pays the loan off more quickly.
Here is just one example -
Suppose a car loan with 60 month term in the amount of $30,000 at an interest rate of 5.00%. Monthly payment is $566.14, interest would be $3,968.22 - if just the regular payments were paid on the monthly due date.
Now, suppose you paid $600.00 per month on this loan. You would then make 56 payments of $600.00 and a 57th payment of $110.27. Interest would be $3,710.73.
But my point is will it make a difference if you pay that (instead of $600 on the due date only) as I am doing, say $100 here, $200 a week later, $100 the next week and so on..."a difference" meaning... in the speed of paying off the loan or how much interest you end up paying?
Yes - speed (even one day) and amount paid both matter and affect total interest paid. The exact (to the penny) can vary a little bit - depending on which of the allowable interest calculation methods are used.
One (of several) ways of calculating daily interest is to divide the rate by 365 and calculate interest from the last date paid (assuming all interest was collected) to today. Interest calculated is charged first - and the remainder of the payment is credited to principal. So, if a payment (principal and interest) was made on September 15, 2018 and the new principal was $10,000.00 and the interest rate was 5.00% - then the interest to today, October 9 would be calculated using days. The calculation would be ($10,000 x 0.05 x 24)/365 = 32.88.
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Nate79
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Re: Best way to pay this car loan off?

Post by Nate79 »

As far as I'm aware auto loans accrue interest daily. This is different from a home mortgage which accrues monthly. It means for auto loan the day you make the extra payment matters but for a mortgage it doesn't.
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dm200
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Re: Best way to pay this car loan off?

Post by dm200 »

Nate79 wrote: Tue Oct 09, 2018 3:26 pm As far as I'm aware auto loans accrue interest daily. This is different from a home mortgage which accrues monthly. It means for auto loan the day you make the extra payment matters but for a mortgage it doesn't.
Yes - although there are some exceptions, this is generally true.

So, if I pay my mortgage ten days early - the lender charges the same amount of interest, BUT if I pay a car loan ten days early - I pay less interest over the life of the loan.
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