The time frame of this post was originally going to be about how I made healthy cookies with spent grains from my homemade brew a couple of weeks ago…however, that was a tragic failure. I learned I need to tweak my recipe if I am going to replace sugar and butter with coconut oil and honey.
The cookies weren’t that bad… if you enjoyed the taste of dirt. However, they are canine edible and my parent’s dogs really seemed to enjoy them. But, they also eat literally anything, so I guess that is not a good comparison.
I will continue to work on the recipe and get that posted.
Onto the topic at hand: My vehicle loan.
I currently drive a 2012 Ford Fusion with 122,000 miles that is still running mechanically sound (knock on wood). I have a loan that I originally signed for $21,272.50 with $332 monthly payment a 5.04% interest rate…co-signed with my mother.
Yes, it would not be an article on Hoosier FI if I did not share some embarrassing aspect about myself. When I purchased my Fusion I had just moved back from my sabbatical in Charleston, SC and really did not have the money to buy it outright (upon that I actually laughed) or credit to get a good rate or enough cash to make a decent down payment. I honestly do not remember what the interest rate would have been, I just know it was not good. Hell, they may not have even financed me. This was in early 2014 and this was WAY before I started taking control of my life and not living like a financial dumb ass.
This post is one that, to be honest, never thought I would write. I was raised that having a car payment was perfectly okay and as long as you were making the minimum on time that is all that mattered. Obviously, after studying all the personal finance blogs, reading, and talking to so many great people, I realized that is no way of living.
I also never thought I would be able to be good enough with my money and bring my car payment down to such a reasonable amount that I could literally pay it off right now.
Seriously, I could not believe it. Awesome, right? Hell yeah!
However, after running the numbers (multiple times) earlier this year I had decided that when I received my tax return (and appropriately invested a good amount in a few other financial areas) that I would take the rest and pay off the remainder of my loan. Which, at that time was around $11,100 (current, it’s sitting right around $10,100).
Any of you reading this that have struggled financially, I am sure you can attest that $11,000 is not chump change. It would be, by far, the most cash I have ever paid for something in my life.
I would also for the first time actually own my vehicle, not loaning it from the bank.
Translation = Big Freaking Decision.
I thought, concentrated, and even meditated on what I should I do with this loan. If I paid it off, I would damn near be draining my savings, which is not something I really want to do. I don’t have thousands upon thousands of dollars sitting emergency funds (I do have one, though) in the event something bad could happen and I would need cash quickly.
However, on the other hand, once I pay this loan off, I only have one loan left – about $28,000 in student loans at an extremely low interest rate.
One option I thought of was that I could pay double payments or slightly over the minimum and be financially comfortable but pay longer on the car loan. Which, I actually have been doing already.
However, If I paid my loan off in one large payment I could use the money I was paying for my auto loan and send it to my investment accounts or to another savings fund or pay more on my student loans.
That is my dilemma – pay off and drain my savings and only have student loans left, or pay slightly over the minimum (or double) and pay it off quicker, but still not as fast as I would like.
After a long mental debate and discussing with a few people I settled on an idea that I did not consider at first:
What if I just paid $1000 a month until it was paid off?
$1000 will still have my loan paid off within a year (goal #1), not drain my bank account in fell swoop like Ice did to Ned Stark’s head (goal#2), and if I can’t pay the $1000 one month for some reason, it is not a big deal!
In fact, I currently have an appointment scheduled for a general maintenance check-up on my Fusion next week. This could have a huge impact on how much I pay this month. If it looks like I need some preventative maintenance performed in the near future, I would much rather pay for that than $1000 on my auto loan.
As of this writing, I have already made one $1000 (reflected in the picture above) payment and it was slightly scary to see such a large chunk of money leave my bank account at once. But, after a couple of days when the payment hit my bank and my loan balance dropped, it made me feel a whole lot better.
So, for now, I believe I am going to try to continue paying $1000 and see where this takes me…and of course keep you all updated.
What do you all think? Have any of you ever been in a financial situation like this? Let me know!