It's the final countdown...£10k to go

mark55man

That sounds very much like the thread I read, that 50% definitely rang a bell.  It's good to learn even if not helpful in your precise circumstances

Sarahwithlove

If you like the car and intend to keep it for a while then I would just pay the balloon payment and be done with it. It's nice knowing the car is yours I have to say. 

t2rry

Sarahwithlove said:

If you like the car and intend to keep it for a while then I would just pay the balloon payment and be done with it. It's nice knowing the car is yours I have to say. 

oh yes, this was never in question, just the mechanics of paying it off early and working out how we save the most money in doing so.  We'll pay it off when we have the cash in August, which should save us around £1,100 still.  We'll be keeping the car for a long time to come, really want to get to a point where we're really maximising our monthly savings capacity.

t2rry

ah man, now i'm doing the going round in circles in my head thing

I could, of course, rather than waiting until I have the cash in full to settle the car, which will be around August.... I could start making over payments to it now...  That will save me more interest than waiting until August and paying it all, though I'm not sure how much...

I have been planning to just pay off the CC and build up my banked funds at the same time, so pay off £1,000 of the CC for the next 5 months, which will have it paid off before the 0% ends and means I can then also be saving £1,500ish per month into my banked funds.

I could do the same but overpay the car too...for instance each month:

pay £1,000 off the CC until it is gone
pay £1,000 (plus the monthly £300 payment) off the car
put £500 (give or take, dependent on the month) to savings

When the CC is gone, I will then have that £1,000 more to save or overpay

Sarahwithlove

Sounds like overpaying could work for you. But if you do that will you have enough saved to pay the balloon payment by time you have cleared the loan through overpayments? 

t2rry

Sarahwithlove said:

Sounds like overpaying could work for you. But if you do that will you have enough saved to pay the balloon payment by time you have cleared the loan through overpayments? 

In general I'm including the balloon payment, so when I talk about paying it off in August, that's the total amount; loan element and balloon payment together.

I have given the company a call and understood it as this:

They won't reduce the balloon payment via overpayments, nor will they reduce the term of the loan.
What they will do is reduce the monthly payment amount.

So if I made a payment now of £2,000, my monthly payment would reduce by around £100 per month, and I would save £160 interest over the term.  That will keep adjusting every time I make an over payment until the monthly payment is 1p, and each overpayment would save me more (albeit a reducing amount of) interest.

At that point to settle it, I would request a settlement figure which would essentially be the balloon amount plus any residual interest owing.  Which I could therefore do at any time...leaving me with ample time (and extra money to save from the monthly due amount) to save the balloon payment.  Theoretically, whatever I do , I will always have enough saved to pay the lot off by August, but this way I should save more interest.

This whole scenario would mean a big signature adjustment, as I've wanted to concentrate so much on the CC's over the last year I've set this aside, but now it's so imminent, my brain is kicking into 'save as much interest as possible' mode, because it's all going to be paid off (or possible to pay off) by August anyway, so I should be doing it in the most MSE way possible.

If I still had a credit card at 7.1% interest, plus the existing credit card at 0%, I'd be paying down the 7.1% card as much as possible right now, rather than concentrating on the 0% card, so I guess I should think of the loan in the same way.

Sarahwithlove

I can see the logic in that. Especially if you will still be able to pay the card off in the 0% period after you have cleared the loan 

t2rry

Sarahwithlove said:

I can see the logic in that. Especially if you will still be able to pay the card off in the 0% period after you have cleared the loan 

Thanks, yes I will.

So I think I'm going to pay £2,000 off the car loan...that will leave £4265.80 to pay off in equal monthly payments (If I don't make any other overpayments that is) - saving £159.43 interest.  It will push back my CC debt neutral date by one month, so instead of being this coming February payday, it will be March payday.  Then come next month I will recalculate what another overpayment will save me, what difference it will make to my monthly car payment and what difference it will make to my CC neutral date.  Each time I do it, it should just push my CC neutral date back one month, but I'll judge each month whether I want to do that.

I suspect the most sensible thing will be to keep making an overpayment until the car loan is all but gone and the monthly payments are down to 1p, then it will be a case of paying off the CC and saving to then settle the balloon payment too.

Still all of this should be possible by August, which is when our mortgage fix is up, so good timing in that respect too as we should otherwise be completely debt free and our disposable income will be as good as I feel like it's ever going to get!!

Guess I need to change my signature to include the car now.... but it's so neat at the moment and I feel a little like I'm changing the goalposts on myself here on the eve of completing the original goal!!! It also means my 'last 10k' title is a bit off as I've now essentially increased that £10k by about an additional £12k

t2rry

There we go, new signature, starting afresh for 2021.  I saved/paid off almost £15,000 in 2020, and I don't want to forget that, but think an update is good now I've rejigged the parameters of our debt busting.   

It does look a lot scarier now though, £20k to pay down again!! But a least I don't need to find that all in cash as I've included the interest in the Car PCP total, hence now also having an interest saved amount in the totals.  

Plus, that means I've already paid off £3,700 this year, and since we're only 6 weeks I cannot be anything but elated with that!

t2rry

t2rry said:

There we go, new signature, starting afresh for 2021.  I saved/paid off almost £15,000 in 2020, and I don't want to forget that, but think an update is good now I've rejigged the parameters of our debt busting.   

It does look a lot scarier now though, £20k to pay down again!! But a least I don't need to find that all in cash as I've included the interest in the Car PCP total, hence now also having an interest saved amount in the totals.  

Plus, that means I've already paid off £3,700 this year, and since we're only 6 weeks I cannot be anything but elated with that!

Actually, if I had added on my car payments in 2020, I actually paid off an additional £3,500 last year!!! That's a better way to look at it, I've increased my amount to pay off but it will now reduce so much quicker because I'm including a whole other monthly payment I never previously took into account, plus the maximised monthly savings now too.  I also have the £500 credit card payment to take into account this month, just waiting for the bill to come through on that to get the CC down to £5,000.