Have you ever seen your car as a money vacuum – taking up your wallet’s contents, but never giving back? What could you do with an extra $200-$300/month? What financial goals would you achieve sooner by redirecting that money from a car loan? Here are a few ideas:
- Pay off your credit card debts faster.
- Eliminate your student loan.
- Save money up for a rainy day.
- Start funding your house down payment.
- Get some savings to start a business.
- Retire early.
As you can see there are numerous possibilities that you can explore if you avoid taking out a car loan. The big worry for most people is how to find a reliable used car that they can buy with cash. The good news is that it is possible. We’ve done and we’re about to do it again. We’ve saved enough money in our car replacement fund to buy a roomy family car. I’ll share some tips that will help pay off your car loan faster.
Before I get started, I want to add, if you can sell your car for more than the amount of the car loan, then go for it. Take what you have left over and get a commuter car. I’ll share in a future post on GPT how you can buy a car with cash.
Finding Money to Pay off the Car Loan
If you’re on a tight budget and you’re underwater on your car loan, you may feel that you have no extra money to put towards paying the loan down. I understand; I was in that situation in college. We were on a very limited budget so it took some work to get it done.
Tracked Our Budget
First thing we had to do was to track how we were spending our money already. Coming up with a budget without seeing what spending habits truly are can lead to unrealistic budgets. A free (and easy) tool that allows you get that done in about 15 minutes is Mint. Looking at our spending saved us about $75/month from all the tiny impulse purchases we made.
Changed Our Cellphone Plan
Believe it or not, by spending a bit more to add a text plan, we saved money overall as I stopped paying extra for the texts that went over my limit.
Switched Our Auto Insurance
We still needed car insurance, but by calling around and checking for membership discounts we found we could cut the car insurance premiums to about half through Costco.
Created our Own Bundle for TV, Phone, and Internet
With our busy schedules it made sense to create our own bundle. Here’s what was available:
|Standard Cable||$53.45 per month|
|High Speed Online (up to 7 Mbps)||$47.95 per month|
|Digital Phone Unlimited Nationwide*||$39.95 per mont|
Here’s what we created to give us what we needed:
- Basic Cable $12.25/month
- Road Runner High Speed Online $34.95/month
- Skype US/Canada $5.95/month
What’s even better today is the variety of options you now have for cable, TV, and internet.You can sign up for Netflix or Hulu Plus and drop Cable all together.
Automate Extra Payments
As soon as you negotiate better deals and lower your monthly bills, do yourself a big favor and set up an automatic payment for that same amount. Don’t wait; use your bank’s online bill pay and have a recurring payment set up to bring the loan balance down faster.
Any extra income you receive, like a tax refund or a bonus from work, use to pay the loan even faster.
Thoughts on Having No Car Loan Loans
I’d love to get your thoughts on cars and loans. Do you have a car loan? Are you planning on paying it off sooner?