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Finances & Money

How we dripped our way out of debt

June 20, 2007
By Clever Dude
- Leave a Comment

After reading NoCreditNeeded’s article titled “Drip, Drip, Drip Your Way Out of Debt“, I got to wondering “How much interest did we save by paying off our Malibu almost 4 years early?”

I hopped on over to the Bankrate Auto Loan Calculator and plugged in the following information:

Loan Amount: $25,000
Interest Rate: 5.95%
Term: 72 months (6 years)

I then ran the numbers and checked out the amortization table for the loan:

  • As of June, 2007, I should have paid about $2800 in interest
  • For the entire loan, had I only paid the minimum payment, I would have paid almost $4800 in total interest!
  • Therefore, I saved at least $2,000 in interest by paying off early

I say “at least $2,000”, because since I paid an amortized loan off early, I actually paid less than the $2800 in interest. I really don’t know how much I paid, but I do know that at most, this car purchase, with negative equity, interest, taxes, tags, etc., cost us almost $30,000! How stupid! And this was for a cheap, plastic, 4-cylinder Chevy Malibu! We could have kept our gas-guzzling VW Passat GLX, with its premium fuel requirement, and saved the $8,000 we lost on the trade-in.

But we didn’t, and we have to live with that stupid, stupid mistake from two and a half years ago. But now the loan is paid off, and we’re moving onto our next debt…

$10,000 in credit card debt!!!

Reader Interactions

Comments

  1. mapgirl says

    June 20, 2007 at 9:42 am

    YAY! Now you own the car free and clear! 🙂

    Reply
  2. The Happy Rock says

    June 20, 2007 at 11:25 am

    Also remember that you gain the cash flow from the time you paid off your loan to when the loan would have ended. This cash flow can be used to save you more interest, or even earn interest.

    Reply
  3. MoneyNing says

    June 20, 2007 at 4:35 pm

    I’m assuming you wanted to pay off your car loan before the credit card debt because your credit card debt has a smaller interest rate (0%) right?

    Or is your decision a more emotional one since you thought buying that car was a mistake and you want to get that out of your mind first?

    Reply
  4. Clever Dude says

    June 20, 2007 at 5:16 pm

    MoneyNing, I actually have a post already scheduled for tomorrow to discuss just that topic!

    Reply

Trackbacks

  1. No Credit Needed » Blog Archive » No Creativity Needed (Just Linking To Some Great Reads!) says:
    June 23, 2007 at 10:48 pm

    […] Clever Dude wrote a post about paying off a loan early.  Debt reduction ROCKS! […]

    Reply
  2. Personal Finance and Investing Blog » Blog Archive » No Creativity Needed (Just Linking To Some Great Reads!) says:
    June 24, 2007 at 12:03 am

    […] Clever Dude wrote a post about paying off a loan early.  Debt reduction ROCKS! […]

    Reply

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