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Early car loan repayments

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JohnnyH:

--- Quote from: Hamster on November 16, 2017, 09:07:32 pm ---So let's assume a "bad" financial decision is imminent and you want to buy a car. For the sake of the example we take the possibly worst option and finance it with a balloon payment (let's assume R200k with a 25% balloon (R50k) over 60 months). You stumble across a lump sum and pay off some of the debt. Do you:

1. Reduce your monthly repayment amount (sopay less each month)

2. Reduce the term of your loan (pay the same amount but for a shorter time meaning less interest)

3. Pay off the balloon amount.

Asking for a friend.

--- End quote ---

From my own experience (Wesbank), we only paid something like R375 for early "termination" in 2015. At the time the account was linked to my FNB account & we just started paying in R1000pm extra when we could. We kept our monthly payments constant as we had no other debt. It was really cool to see the number of months that we still need to pay come down steadily.

If you have the full R50k now, maybe pay off the balloon if possible? I think it would have the biggest impact (interest savings) seeing that there is still six years of payments left (If I understand you correctly).

Otherwise paying in the full amount would probably reduce the term quite a lot, also a big win.

By the way, I didn't even know its an option to pay the balloon amount at any time...I always just assumed that you had to wait till the end.

Hamster:



--- Quote from: JohnnyH on November 20, 2017, 03:46:43 pm ---From my own experience (Wesbank), we only paid something like R375 for early "termination" in 2015. At the time the account was linked to my FNB account & we just started paying in R1000pm extra when we could. We kept our monthly payments constant as we had no other debt. It was really cool to see the number of months that we still need to pay come down steadily.

If you have the full R50k now, maybe pay off the balloon if possible? I think it would have the biggest impact (interest savings) seeing that there is still six years of payments left (If I understand you correctly).

Otherwise paying in the full amount would probably reduce the term quite a lot, also a big win.

By the way, I didn't even know its an option to pay the balloon amount at any time...I always just assumed that you had to wait till the end.

--- End quote ---

Didn't know about the option either it heard it is there. The financial numbers are there as examples so not accurate. Go big or go home right (according to my friend *cough*)

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