Paying off a car loan

[Synpax]

Hi,

A little over two years ago I really needed to buy a car. I got a letter in the mail saying I was pre-approved through a dealership for what turned out to be 45k.

I had a pretty ragged credit rating due to funding my way through college using credit cards. I think the APR on the car loan was around 15%, monthly payments of 360. It was a 4 year loan. I think the car price was around 14-15k.

Since then I have gotten my act together. My income has increased dramatically as my business has taken off. I've gone from 55k to close to 140k+ for this year and every few days a new opportunity comes along to boost it further. There is some HUGE stuff on the horizon.

I have paid off all credit cards. I now want to pay off the car. I will probably do it this month.

Despite paying through over half the loan period, it's only down to a nice round 10k.

Anyway, before I did this, I wanted to check and see if anyone had any insight on how to best do this.

Side note - I use the car primarily for business. I have a regular gig (W2) and my own S-corp.

 

[nycgirl]

Make the monthly payment. Then write out another check and make sure to note on the check "APPLY TO PRINCIPAL ONLY." This will bring down the principal quicker and result in less interest payments. This technique can be applied to any kind of loan (mortgage, credit, school, etc.)

 

[WhatOkay]

Make the monthly payment. Then write out another check and make sure to note on the check "APPLY TO PRINCIPAL ONLY." This will bring down the principal quicker and result in less interest payments. This technique can be applied to any kind of loan (mortgage, credit, school, etc.)

Could you please elaborate further on that technique. THank you.

 

[Vita]

if you want to pay it off, call the loan company, find out the payoff, and ask them how they want it. why bother writing two checks if you plan to pay off the whole thing.

the dual check thing is good if you want to hammer away at the principle, but to pay in full, just call them and find out the exact amount. you can likely pay it over the phone as well.

 

[nycgirl]

Could you please elaborate further on that technique. THank you.

If you cannot afford to pay the amount in full, but can make extra payments that is the technique to use. You pay the monthly payment with one check. Write out another check for the extra amount, but make sure to state that it is for the PRINICPAL ONLY. If not, they will apply the payment to the interest. If you want to pay off a loan quicker, you have to get the Prinicpal down. Just one extra payment a year used towards the PRINCIPAL, can knock 5 years off a 30 year mortgage. I learned about this at a Home Ownership Course.

 

[Razorguns]

If you cannot afford to pay the amount in full, but can make extra payments that is the technique to use. You pay the monthly payment with one check. Write out another check for the extra amount, but make sure to state that it is for the PRINICPAL ONLY. If not, they will apply the payment to the interest. If you want to pay off a loan quicker, you have to get the Prinicpal down. Just one extra payment a year used towards the PRINCIPAL, can knock 5 years off a 30 year mortgage. I learned about this at a Home Ownership Course.

Where did you hear this technique? Most checks are handled by automated machines that won't care what you write on it.

 

[MattTheSkywalker]

does the biz own the car? do you want to keep the car?

If you do, "sell" the car to the business for whatever amount is left on the loan. When you "sell" it, you'll have to pay off the car to clear the lien on the title anyway.

 

[bdog527]

Where did you hear this technique? Most checks are handled by automated machines that won't care what you write on it.

It's very common, I do it with my home loan all the time.