Just over two years ago something bad happened. My husband’s car was rear ended as he waited in line at a red traffic light. Unfortunetly his beloved, used rodeo ute was completely written off. It left us down one vehicle. As I was using our very unreliable 8 seater people mover to drive between two schools ad two kindergartens at the time.
Only recently, we had just opened our home to two more children. We were already caring for five and pregnant with our last baby. We needed another vehicle fast so my husband could return back to work to support our family. This left us with only one option as we waited for our insurance to finalise the outcome and payout of the accident.
We had to apply for our very first car loan.
On Saturday morning with loan question at the ready. We headed to some car dealerships and managed to find a car that would suit our family. We had read all the fine print and applied for a new model used car.
After we where approved, my husband picked up this new to us, used car later that week. Than it become up to us how long we where going to be making payments on this car. We could choose to stay to contract and do the four year contract. Or we could be smarter and choose to pay it off quicker.
We choose to pay it off quicker. All because we had a plan before we even set foot in one car dealership. And this is how we did it.
Make Sure The Repayments Fit Into Budget
Before we even looked into finding a used car, we look at how much we could afford. We were not great with money two years ago. However we still knew it was important set a maximum limit on how much we would spend each week on car repayments. This kept the car loan within our means and help narrow down the cars that we could look at. Helping to stop us for looking at vehicles that would we wouldn’t be able to afford in the financial situation we are in now. We made it clear to our nice Car Sales Man, that we were not going over budget, no matter how good a deal was.
Find a Low Interest Rate
Before we left for any used car sale yards we would check and see what the financial departments interest rate was on the car loan repayments. A very quick online search or even a phone call to the finance team helped narrow down our options. With a lower interest rate, the amount we would have to repay went down. It made the much better deal that much more appealing once we where approved.
No Early Exit Fees
Asking about early exit fees on our car loan was a very important step on paying off our car loan early. We didn’t want to be locked in to a car loan if we where able to make extra payments. The last thing we wanted was to penalised for paying off a car loan quicker than the lender wanted. Different car lender have different contact conditions. That is why it is always so important to ask the right question that will save you money in the long run.
Never Make Just The Minimum Repayment
As with most loan and debt, minimum repayments are the way you are being made to pay more money than you have to. If you have a loan where you don’t get an extra fee for paying off the loan sooner. Then don’t make the minimum repayments that the lender tells you to make. Most lenders will set up a direct debt automation to take out the minimum repayment. After getting approved, it was our job to check the fine print. To find the extra standard charge for making a Bpay payment and then adjust our schedule accordingly. Saving money on loans is working out how to clear the balance sooner, rather than later.
My final Thoughts…
This was our first time getting a car loan. We didn’t plan on being losing income at all but even when we did. We had already made sure that the car loan still fit into our budget but setting our limit on repayments below our means when we first applied. When we applied we knew just enough about loan to avoid being locked into a contact that would hurt us in the long run.
I remember when I was in school and having a year 12 maths teacher tell us that a car was the worse invest that we would ever make in your life. This was because the value of the car would drop over the years. The value would always be decreasing. It has stuck with me over the years. And was one of the reasons I had a little strategy going when applying for a car loan. We needed to make our money work for us and not just be living to pay off bills. Even on a low income.
Here is the quick recap to paying off our car loan sooner
- Make Sure Repayments Fit Into Budget
- Find A Low Interest Rate Car Loan
- No Early Exit Fees
- Never Make The Minimum Repayment
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