My Car Loan
When I bought my 1999 Toyota 4Runner in 2006, the best interest rate I could have gotten with my credit score was 9%. I didn’t have BAD credit, I just hadn’t had enough for a long enough time. At the time, I didn’t realize that getting a car loan would have actually helped my credit score by having different types of credit; that’s why I took a loan from my parents at a great deal.
I borrowed $5000 at no interest to be paid in full November 2008, and $5500 at 7% interest for three years, to be completed in November 2009. My monthly payment became $169.82, not including the $200/month or so that I *should* have been putting aside each month, specifically for the $5000 balloon payment.
I was putting money aside; in fact, I saved a LOT during that ten months as a teacher. But when I was out of work for essentially six months, my savings dried up quickly. I now don’t have enough for that November balloon payment and I have to work to get to that point.
I decided to refinance my loan with my lender, Dad. Yesterday, we worked out a new schedule and a new interest rate. I had 18 more payments left, so I increased it to 30, with a 31st balloon payment of $500. The interest rate changed to 6%, which leaves me with a monthly payment of $88.71. I already have over $3400 in my Vanguard Money Market account, with $200 automatically going in each month. By November, I will have over $5000 ready to go if I also put in the $81.11 I’m saving each month.
The only problem with my Money Market account is that I have to keep at least $3000 in it, which I will be unable to do at that time. When I get to November, I will close the account (sadly) and move my money into a high yield savings account like the ING Direct one everyone’s been talking about, until I have that $3000 again. Since I’ll still be saving $281.11/month, hopefully it’ll take under a year. Also, hopefully by that time I’ll already have received a raise that beats the rise in my cost of living, so that I’ll be able to save even more.
