January 9, 2021, Jamie and I woke up bright and early – as usual – and were drinking our coffee when I had a crazy and random idea. Why don’t we pay off our $14,338.09 auto loan on our Ford Mustang? To my surprise Jamie did not say “no”. Instead, we opened up our mobile banking app and looked at our account balances, reviewed how much we were making each month, what our monthly expenses were (expected expenses), and then did some math to see what we would save by paying the loan off early.
After doing the math, we came up with a projected savings of $2,500 if we paid off the loan early. Meaning if we paid off the balance of $14,338.09 on January 9, 2021, then we would be saving ourselves from paying an extra $2,500 in interest over the remainder of the loan. The savings did not sound like much, but to us paying off the loan early meant:
- Not having a $315 monthly payment to think about (5th 3rd bank would not let us do automatic monthly payments unless we had an account with them..)
- That we could then turn around and allocate that $315 a month to go back to our savings account, home improvements, or to increase our food-travel-date night spending (we plan on saving the money).
- That we had one less loan outstanding. And boy does it feels great to sit in our Mustang knowing we own it outright – it feels like it drives better without the weight of the loan holding it back.
We know not everyone is able to pay off their loans early, but if you do have the money sitting in a savings account – then you should at least crunch the numbers. If you are just saving money for sole purpose of saving – and no greater purpose – then you should pay off your loans! You can then get back on track to building your savings back up and know that you saved yourself from paying extra interest on the loan. Also, we thought that if we decide to get a new vehicle, we no longer have to worry about being upside down on trading in our car. Rather, we have the full value of our car to use as a trade in for a new car.
You can use this mindset to pay off any loan or obligations you have outstanding: car loans, personal loans, student loans, credit card debt, etc. I know it can be tough to see your savings account take a hit to pay off a large loan, but it is definitely worth it in the long run. Stop letting your lenders make money off of you, turn your loans into assets by paying them off as soon you can. In the end it feels great freeing ourselves from a monthly payment and being able to choose where we actually want that money to go.
Thanks for stopping by, and come back to check out other random posts we want to share with you in the future.