OK Fam Bam, I have talked about this before and some of you have taken my advice and chipped away at some debt and got it paid off faster. YAY!
So what am I doing at 12:00am on a Wednesday during quarantine. Budgeting and strategizing for the rest of 2020, that's what.
So we always pay a little more than what is due on our loans, even if its $20/$30/$40 a month.
I ran the numbers on a auto loan we have. Keep in mind we have a low rate under 4% on a 5 year loan, so these numbers will be drastically different (in a good way) if your interest rate is higher than that.
So let's put things into perspective. We're currently paying $80/extra a month (not outrageous!!!!) That's equivalent to NOT eating out a couple times a month
+ PLUS 1-2 extra payments a year (tax return is a perfect time to pay off/down debt)
At the rate were going we're projected to save $447 and pay off the loan 11 ***ELEVEN!!! months earlier. YO! That's almost an entire year.
Imagine paying off your car one year earlier than you expected and having an extra $447 to your name!
I'm not a financial expert by any means but I do know a thing or two about money.
What I would recommend
Step 1) Know your numbers! Collect all your debts and write down...
The Balance on your loans
The Interest Rates
The Projected end date/how many months/years until it's supposed to be paid off
The amount you are currently paying monthly
Step 2) Prioritize which debts to pay first.
Snowball effect (pay off debts with the smallest loan amount first) If you owe Tina $100 and bill $500, pay Tina first)
If need be, transfer balances from higher interest rates to lower interest rates to save you money
Step 3) Pay MORE than the minimum on any loans that you get!
If you can't afford it, and it's not a necessity to live, DO NOT BUY IT. Debt hanging over your head is more stressful than the joy those new heels gave you. Or the smile on your Kiddos face when you got them a new toy.
Use this link to calculate how much you'll save by adding $10-$50 a month to your payment.