Paying off the wheels - 3 year debt into 1

Zola. · 26 February 2018 at 12:43PM

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

EssexHebridean · 26 February 2018 at 1:53PM

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!

missplant · 26 February 2018 at 2:31PM

good luck with your car mission!

Zola. · 26 February 2018 at 3:51PM

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:

EssexHebridean · 27 February 2018 at 1:02PM

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.

Zola. · 28 February 2018 at 2:57PM

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 quicker

Zola. · 2 March 2018 at 9:51AM

Regular payment out this morning of £219, takes the bill down to £5504.

enthusiasticsaver · 2 March 2018 at 11:07AM

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.

Zola. · 9 March 2018 at 3:13PM

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 £4007

Zola. · 29 March 2018 at 11:39AM

Another £500 overpayment made yesterday. Remaining debt down to £3515, with the regular payment due to come out on the 1st April.

LittleMissKitty · 29 March 2018 at 5:29PM

Good luck, not that you appear to need it you're doing amazingly well!

Paying off the wheels - 3 year debt into 1

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