My car loan is no more! It has ceased to be!
I drove down to the credit union today and dropped my final car payment on them. I felt pretty good going in there with my early car loan payoff. They all probably thought I was super cool making sound financial decisions.
It was in the form of a $94.11 check. The lady looked at me and told me I also owed 26 cents in accrued interest since that total posted. I mumbled something awkwardly then in lieu of writing a new check, I gave her a dollar bill and got 74 cents back. COINS!
The original terms of the loan were a 2.24% interest rate and a 60 month payment schedule. It’s not a bad interest rate but I’ve always been the debt averse type. I like limiting the amount of bills I must absolutely pay each month and my loan was exactly that.
It was $454 that added to my expenses each month and I wanted to ditch it.
In the end, I decided last year when setting my goals that I wanted to throw extra payments at this thing to get it paid off early. In fact, my gold medal goal for this year was to get the car loan off the books and now that has come to fruition.
I threw extra dollars at it here and there with the intention of paying it off ASAP. Would it have been better to throw that money into the market versus my car loan? If I assume a 7% long term return then yea, that’s better than a 2.24% guaranteed return from my loan payoff. However, the 2.24% is better than the 1.9% I’m getting in interest right now.
Is paying off your 2.24% rate loan early a 100% smart decision and how many licks does it take to get to a center of a tootsie pop? The world may never know. The reality is that there’s more to it than pure numbers. Sometimes having no debt is totally worth it even if you can get a slightly better return elsewhere. That peace of mind is pretty nice.
The 60 month loan was paid off in about 48 months. Now, I have an extra $454 each month to spend on random things. I will buy all the cool things that I’ve been depriving myself of like….hmm, I guess there’s nothing I want.
Oh, who am I kidding, I have an extra $454 each month to stuff away in my cheeks like a hamster. Naturally in this case the cheeks are a metaphor for the stock market.
The early payoff means I saved about $321 in interest that I would have had to pay if I didn’t make any early payments. That’s almost a free payment right there guys! MONEY!
The best part is that I am now officially debt free. That is until we buy a house but that’s a story for another day.
Here’s to being debt free!