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Paying off the wheels - 3 year debt into 1
Zola.
Posts: 2,204 Forumite
Just before Christmas we bought a fairly new car. Our last car was worn out, 12 years old.. The new car price was £14,500.
We paid half up front and took out a private bank loan for the remaining balance over 3 years. The APR is 3.44%, which is higher than our mortgage rate, but significantly better than car dealers finance option (10%!!!).
I log in to my banking app most days, and I absolutely hate seeing the figure going up a pound or two every day or so!! :eek: We have since had a complete turnaround in personal ethos with regards to all consumer debt, now totally against it and have promised ourselves never to do it again. Other than student loans, and a mortgage, and a few hundred quid on a sofa, these are all of our debts.
So this blog is all about clearing that car debt as quickly as possible. We have the money in savings and investments, but we don't want to deplete those to pay this off now, we are attacking it via overpayments from income etc. Tightening the belt, basically! I am targeting a one year pay off as this wont affect our monthly investing plans and everything else, the sofa will be finished around then too. It was a 0% APR one from D*S...
Starting debt was around £7500. We have paid 3 regular payments so far, and made an overpayment of £1200 from savings to get the ball rolling.
December 2017 - Circa £7500
January 2018 - £6920
February 2018 - £5720
We paid half up front and took out a private bank loan for the remaining balance over 3 years. The APR is 3.44%, which is higher than our mortgage rate, but significantly better than car dealers finance option (10%!!!).
I log in to my banking app most days, and I absolutely hate seeing the figure going up a pound or two every day or so!! :eek: We have since had a complete turnaround in personal ethos with regards to all consumer debt, now totally against it and have promised ourselves never to do it again. Other than student loans, and a mortgage, and a few hundred quid on a sofa, these are all of our debts.
So this blog is all about clearing that car debt as quickly as possible. We have the money in savings and investments, but we don't want to deplete those to pay this off now, we are attacking it via overpayments from income etc. Tightening the belt, basically! I am targeting a one year pay off as this wont affect our monthly investing plans and everything else, the sofa will be finished around then too. It was a 0% APR one from D*S...
Starting debt was around £7500. We have paid 3 regular payments so far, and made an overpayment of £1200 from savings to get the ball rolling.
December 2017 - Circa £7500
January 2018 - £6920
February 2018 - £5720
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Comments
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You're starting from almost exactly where I did a few years back! It's a good mindset to get into, and it is amazing how much of an impact you can make quite fast when you put your mind to it! Mine should have been 30 months (from memory) and I got shot of it in 13 months I think. As soon as it was gone we were driven to carry on and start overpaying our mortgage too!
Good luck - remember that making small changes can make a huge difference!🎉 MORTGAGE FREE (First time!) 30/09/2016 🎉 And now we go again…New mortgage taken 01/09/23 🏡
Balance as at 01/09/23 = £115,000.00
Balance as at 31/12/23 = £112,000.00
Balance as at 31/08/24 = £105,400.00SOA CALCULATOR (for DFW newbies): SOA Calculatorshe/her0 -
good luck with your car mission!0
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EssexHebridean wrote: »You're starting from almost exactly where I did a few years back! It's a good mindset to get into, and it is amazing how much of an impact you can make quite fast when you put your mind to it! Mine should have been 30 months (from memory) and I got shot of it in 13 months I think. As soon as it was gone we were driven to carry on and start overpaying our mortgage too!
Good luck - remember that making small changes can make a huge difference!
Thanks! We already overpay on the mortgage when possible, but the car is definitely number one priority now.
Consumer debt sucks, I am glad I have done this now to know what its like. I am borrowing from my future time, so I need to not let it happen again! :rotfl:0 -
Trust me - when you reach the point that your cars are your own, your mortgage is paid off, and you have enough in the bank to replace a car if needed it really is a great feeling. Well worth all the work to get there!
Something else to remember on this - you're already made some really sensible decisions around this. The debt you chose to take on is "good debt" in that it was for transport that you needed, not something like a holiday that you just wanted. You also made a good choice to get a bank loan rather than HP or the dreaded PCP finance - meaning that the car is "yours" right from the start. And you shopped around for a good rate too. To add to that you paid half the cost of the car upfront from savings as well. If I was going to pick out one thing then I'd say that you possibly should ideally have just bought a car with the savings at a lower value. That's one to take forwards for the future I'd suggest.🎉 MORTGAGE FREE (First time!) 30/09/2016 🎉 And now we go again…New mortgage taken 01/09/23 🏡
Balance as at 01/09/23 = £115,000.00
Balance as at 31/12/23 = £112,000.00
Balance as at 31/08/24 = £105,400.00SOA CALCULATOR (for DFW newbies): SOA Calculatorshe/her0 -
Indeed, we are a long way off the mortgage, but will keep chipping away at it.
We love the new car, it is a bit of an indulgence, but hopefully it lasts as long as the other VW I am still driving today, its 15 years old! 239,000 miles on the clock haha. Driving it into the ground!
We had been doing £350 a month into a mortgage overpayment account, I may start plonking that into the car payments each month now, would get it done even quicker0 -
Regular payment out this morning of £219, takes the bill down to £5504.0
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Well done on tackling this. We hate consumer debt too but borrowing for a car or an asset (albeit a depreciating one) is the least worst debt if that makes sense. If your car loan interest rate is higher than your mortgage it is better to get rid of that first then tackle overpaying the mortgage. Make sure it is not more cost effective though to direct overpayments into your pensions.I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.0
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I received a share on an inheritance from a family member.
I used some of this to pay off an extra lump sum today of £1500
Taking the car debt down to £40070 -
Another £500 overpayment made yesterday. Remaining debt down to £3515, with the regular payment due to come out on the 1st April.0
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Good luck, not that you appear to need it you're doing amazingly well![STRIKE]DFD 22/7/14[/STRIKE]
OD £1200 ~ CC1 £1875 ~ CC2 £1275 ~ Tesco £4757 ~ Creation £235 ~ FIL £25750
DEBT @ 28/03/2018 = £35092
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