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Car Loan and extra money...WWYD/advice

Discussion in 'Random Discussion' started by TypeSK, Jan 27, 2005.

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  1. TypeSK

    TypeSK Thread Starter

    Joined:
    Mar 16, 2002
    Messages:
    676
    ok, what would you do in this situation. been asking around, looking for advice.

    Right now, me and DH, have 1 kid .... 1 on the way. lately, we been living with DH's parents while we both go to school full time. (we been getting lucky with schedules). i dont work, but DH does.

    DH be graduating next spring from college. i will be the following spring 07.

    we been saving up alot of money. we will have saved up by end of year a gauranteed $16K. but it looks to be more like around $20K

    we plan on moving out on our own at the end of this year. as of right now, with the money he makes, working part time, we will only be short monthly about $300 (as according to my DH when making his calculations for everything). that shortage, was planning on coming out of our savings money each month. DH is a huge money saving-math-penny pusher. so we somehow save alot of money and he is able to figure this out. right now, after payig all the bills, we have an extra $200/mo, which we use to get other necessities/fun (going out to eat every once in awhile, pay some extra baby bills for our son, etc)

    as far as baby bills, our whole baby coming in june is paid completely by insurance. diapers, we have enough diapers to last the new baby until he is almost 2 years old (we buy periodically now). formula, well, hoping to nurse, but in the event i cant, we are buying formula right now. also our baby shower, we are only asking for formula only.

    right now, we have a 03 Hyundai Elantra. We bought it in November of 2003. It is a 6 year loan, paying $313/mo. Car insurance is $75/mo for FULL coverage. Car gas is about $75/mo, $90/mo at MAX. as of this month, we owe $15,800 (we had a bad tradein when we got it. car payment was $480/mo, and he was upside down on the car. hyundai had those year end deals)

    so, our options that we are thinking about:

    1. every year, pay off a principle payment of $600. over the rest of the next 4 years (year 5 of the loan), thats $2400, so that last year, we would only owe about $700 left. when the bank adjusts our monthly payment, we would use the difference and add to the $600 we would pay each year. but if we do this, we would put the extra $700 a month into a 4 year bond or CD, so that when that time comes, we would use it to pay off the rest of the car a whole year early.

    2. pay off the whole car now. right now, we have about $12K. this fall, we get about $3500 in financial aid money from school. so by then, we would have enough money to pay off the whole loan. we would practically lose our whole savings money, but we would have no car payment. and the $300 we would be short when moving out, would be offset/gained from no car payment, and cheaper insurance (if we decide not to keep the FULL insurance premiums that we have now). we would also save interest over the loan ($3000+) over that time.

    then from aug-dec, we would save that car payment money (about $1200), and then from spring, another $3500 from financial aid money, plus our tax return (we do it as fast as we can), at least $4000 (we getting that this year with 1 kid. next year, we will have 2 kids). so we would have left over money for emergency money when we move out. not as much money as like $24-26K we would have if we didnt pay off the car payment though.

    3. maybe pay off $5K-7K and lower a little bit down? DH hasnt figured the numbers on that yet.

    what would you do? any advice?
     
  2. winbob

    winbob

    Joined:
    Aug 2, 2004
    Messages:
    3,370
    First of all, I'm an old fart, but young in heart & mind. I've done very well for myself over the years in spite of listening to professional financial advice...which ALWAYS cost me a big downside.

    I just had this same conversation (on a smaller scale) with my 16 y.o. son, but I know that fell on deaf ears. :rolleyes:

    It is very important to have CASH to fall back on. Cash means anything liquid enough to get your hands on in less than 14 days.

    If you can afford to keep the FULL Coverage on your car DO IT. My son could not afford to have full coverage....now he's having to afford $3000+ to repair his car. Funny how Sh-t happens! So, the money he has SAVED by only getting liability is not going to offset this LOSS for another 2+ years. Oh, his accident was NOT major!!!

    I haven't had a car note since 1972, so I can't speak to today's process with certainty, but "in my day" the payments were FIXED even if you paid ahead or paid on the principle directly. It just got paid off sooner. Only case I've known of different is with a Credit Union loan. Also, since you never mention the Interest Rate, I can't speak to the benefits of paying ahead on the loan versus the cost of 'lost investment opportunity'.

    One quick out of sequence thought...doesn't having all this money affect your financial aid?? Why not?

    So, overall I would say if you have a family, live on your own, and don't have a 6 month $cushion$ behind you...."Be afraid, be very afraid". :eek: Or be ready to move back in with Mom & Dad....if they'll fall for it. ;)
     
  3. TypeSK

    TypeSK Thread Starter

    Joined:
    Mar 16, 2002
    Messages:
    676
    the interest rate on the car is 5.9% .....

    as far as having the money effecting my financial aid, i dont think it does? thats where about half the money comes from ... the other quarter is tax returns ... and the rest is the money ive saved around ... id be paying it off in around aug ... by the time jan comes around, which is when we move out, i'd have about another $8000 .... so that will be more than the 6 months cusion ...

    i dunno..still pushing some numbers around
     
  4. winbob

    winbob

    Joined:
    Aug 2, 2004
    Messages:
    3,370
    Actually it's not WHAT we don't know, it's what we don't know we don't know!
     
  5. TypeSK

    TypeSK Thread Starter

    Joined:
    Mar 16, 2002
    Messages:
    676
  6. winbob

    winbob

    Joined:
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    Messages:
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    See, us old farts get too philosophical for you young stuff ;)

    "Actually it's not WHAT we don't know, it's what we don't know we don't know!"


    When I told the Dahli Lama this he smiled and nodded knowingly...he did know. :D

    The danger is NOT that you don't know, But that you don't even know that you don't know. :eek:

    Get it?

    If you still don't know.....read my experience level notation. I generally know when I don't know, and I'm not afraid to admit it. (y) :)
     
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