It’s always nice to have some extra cash on hand, even more so when you’re in debt and can’t really afford to use it. The average credit card debt of Americans is $6,154, which is a little shocking. But the good news is that there are ways you can get your finances in order without having to rob banks or sell kidneys.
Why should I be in debt?
You are still going to be in debt when you’re done paying your car off, but it won’t be the same. You will be free from the crippling weight of those monthly payments and have more income available to save or invest.
It is a fact that many people find themselves in debt due to high car payments. This is not ideal, but there are ways to reduce your loan payments and be well on your way to paying it off. One of the ways is to pay early. Another great way to reduce your loan payment is by getting a lower interest rate through refinancing or an auto loan consolidation.
Ways to get out of debt
It is sometimes scary when we realize how deeply in debt we are. However, there are many ways to get out of debt, and one way is by making payments towards your car loan. Although it might seem like a daunting task to start chipping away at the bill, if you make small payments every month, after a few years your debts will be reduced significantly.
If there is one thing that most people don’t like, it’s paying off their debt. It seems like such an ordeal to have to pay off something you already worked so hard for. However, if you take the right steps, it can be a much easier process. The first step to getting out of debt is determining how much debt you’re in and what your options are. Here are some ways to get out of debt that might work for you:
How to calculate your savings rate
Monthly payments are a powerful indicator of how much you have saved. You can use this information to determine your savings rate, which is the percentage of any monthly payment that goes into paying down your loan balance. It’s important to remember that the math still works both ways, so it doesn’t matter if you pay down more than the total loan amount – your savings rate will be the same.
When purchasing a car, the monthly payment is not what your actual cost will be in the long run. You actually end up paying more over time because of interest and other expenses. Using one of these formulas and some knowledge of your individual situation, you can calculate how much money you can save each month.
What is a savings account worth?
You may be wondering which is more valuable, the cash in your savings account or the car loan you are paying down. In general, you should always invest in something that will earn a return on your money. A savings account typically earns less than 0.75% interest per year (so you won’t make much if anything). If you’re like most people, you have a car loan that is costing you 3-5% annually. This means when you save and pay down your loan over time, your debt will be significantly reduced but with a savings account, the amount of money actually earning interest can be very small.
An account like a savings is just as important as your checking account. You want to pay off your loan as soon as possible so that you can avoid any interest and make the most use of your loan money.
A story of one man’s struggle with debt
When I was 18, I got a car loan for $10,000. At the time, it didn’t bother me too much because I was only driving about 10 miles to work each day and the car always sat in my parents’ driveway. Fast-forward to 2017, and my credit is shot from student loans and a few other bills that piled up over the years. I now need to pay off my loan at an interest rate of 17%. That’s not even considering how much the car will cost in future years when I may want to drive more or upgrade it…
I had my first car for about 4 years when I decided to buy a used truck. It was just a few years old and ran great. Then, it started breaking down at random times. Every time it broke down, I would call the dealership and they would tell me that they were not going to repair it because they had already sold it. This continued for almost a year until one day I got fed up and called the police on the dealer. The police told me they could do nothing because the salesman hadn’t broken any laws.
You have worked hard for your car and now that you have it, the last thing you want to do is give up your paycheck to pay on a loan. It’s not practical to make payments every month when you don’t even have the funds in your bank account. In order to pay down a car loan as quickly as possible, some people decide to break up the payment into two or more smaller payments. This can put them out $50 in fees each month so rather than add these fees into their monthly budget, they try and find other ways to cover those costs.
A car loan is a long-term loan that you get to repay at interest over time. This can be a difficult thing to balance, especially if your income is low and you have to take on small monthly payments. You might find that it’s worth the hassle to pay off the loan quickly, or you might decide that it’s too much effort for not enough payoff. Whatever your decision, there are ways of getting out of paying your car loan early without losing anything.