Question

You guys are always amazing at giving advice, so I need some help on what to do! My car payment is KILLING ME. Its a 2005 Toyota Matrix 28% Interest ( I know ) My payoff quote was $5, 530 good until 3/2/2020 My payments are $438/mo My tax return is $4, 410 which leaves a decent gap. My question is, do I call and apply the $4, 410? Or should I keep in my account, make regular payments until I can pay it off at once? I want this payment gone so bad but not sure whats the best way to tackle this because the interest is outrageous. I hope this all makes sense! Thank you guys so much! If anyone is wondering, in 2014 my husband and I had poor credit and my car was on its last leg. Car Max was the ONLY place that approved us and they literally approved us for the "cheapest" car on the lot. We didnt choose it, they just said, "Welp, this is your only option" It ended up being a great car and have no intentions of trading it or getting rid of it after paying it off. We were just in a really bad place and desperate with a newborn baby.  

Answer 1

Make the $4400 payment to the principal balance and then two more regular payments then you are done! Then you can snowball that towards EF or any other Debt.  

Comments

@crucible what Im worried about is for every $440 payment, only 200 or so goes to principal. Or would that change once its got that huge 4k payment?  

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So it would be like $1k remaining balance but it would take almost 5 more payments to pay off?  

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@diadromous I would look online at your payment options, you should be able to apply all $4400 to principal

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@crucible It wont let me make a payment larger than $2k via online. I will definitely look for apply to princpal option.  

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@diadromous maybe you can call them to check your options

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@crucible definitely will! I swear I never want a car loan ever again lmao  

Answer 2

Definitely put as much as you can towards the principle amount. This will lower how much you owe in total.  

Answer 3

Do you have any other debt? How is your credit now? You might benefit from refinancing it at a much lower rate and paying off other debt first.  

Comments

@ballerina54743 my credit is better, however, weve looked into a few banks and credit unions, they all said no because we are upside down on the loan and its too old to refinance.  

Answer 4

Make your normal payment then call and put the rest towards principle.  

Comments

@vain43381 oooh good idea. Thank you!  

Answer 5

Apply the whole amount to the car and pay it off ASAP! Thatll bring your principal balance waaaaay down and you wont be paying nearly as much interest. My car is my biggest interest collector too - any extra income I get goes directly towards the car but I still have a good 2-3 years to go before it's done. You got this!  

Answer 6

Take your whole return and pay off the majority, then finish up with your last few payments. Getting rid of that payment puts almost 5300 a year back in your pocket!  

Answer 7

Pay it off!  

Answer 8

Pay the majority and over pay to get it gone

Answer 9

Id pay it off

Answer 10

Pay it towards the principal and I’m sure it’s a common knowledge but if you don’t say «principal” they pay interest first

Comments

@incessant very true.  

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I didnt know this, so I will definitely call. Last month I made a $1500 payment and a few hundrend went to interest even though I had already made the monthly normal payment. The $1500 was extra and they charged me that interest and a $60 "Misc Fee". Like wth is that?!  

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My mistake I think was I did it all online

Answer 11

If you have a cushion/savings , then dump it on the car loan. within 5-6 months making normal payments on the rest (and of you can add extra even better) you’ll have it paid off.  

Answer 12

28% of $1, 000 is a lot less than 28% of $5, 000. If it was me I'd pay off as much as I can as fast as I can.  

Answer 13

Pay it off, but I would also look into maybe having it refinanced if you really need the money for other things. Check your local Credit Unions.  

Answer 14

I would definitely get online and make a payment on principal only. That would being you down to a little over $1000.  

Answer 15

I'd pay it off! Apply all of it to the principle. The money is going to do A LOT for you now rather than sitting in your account waiting until you got the full balance to pay it off later. You're going to save a lot on interest by doing so. Also Toyota are the most reliable, long lasting vehicles as long as you keep up with the regular maintenance - it'll last you years! I still have my 1999 Tacoma running strong! So dont worry, you're paying towards a good vehicle you can keep for awhile. Pay off as much now, you got this!  

Answer 16

Pay off as much as you can! If you keep it in your bank account you are earning like 1% interest, while paying 24% on the car loan. It make zero sense to put the $ in the bank. Tell them you want it applied to principal. It will lower your total interest significantly.  

Answer 17

I would pay it all towards the car! That would only leave a few more payments.  

Answer 18

Put it all towards the car. You’ll be out of that high payment in no time!  

Answer 19

Apply it

Answer 20

Make sure you’ve got a little savings cushion, then throw the tax refund and any other money you’ve got at the car payment. You could be only 2-3 months away from no car payment! I also think owing $1000-1500 on your car might be enough incentive to make some extra cash so you can pay it off quicker. That’s what I’d do, anyway.  

Comments

@safar5651 thats true. I would def feel desperate enough to save any extra cent.  

Answer 21

Pay it off! If you get that balance down you only have a few monthly payments left and you’re done. Do it!  

Answer 22

Pay in one big chunk.  

Answer 23

Throw it at the car!  

Answer 24

My Grandfather was just complaining about his interest too. Ours is "ours" but not in my name at all (I was credit ghost at the time) but we need to refi soon to see if we can lower the payment We had more options for cars but we were in a similar boat. Hubby ran over a puddle during a flash flood thing we had here (seriously it was like 15 min long) and FLOODED our engine in the other car. Our tax return is fixing said car You did what you HAD to do, got what you needed and maybe just try to refi soon, good luck!  

Answer 25

I would pay down the car loan as much as possible and then try to send any extra money to pay it off entirely. Good luck!  

Answer 26

I would put it all towards the car and then you’d be able to pay the rest off in just a couple more months.  

Answer 27

Why don’t you look into refinancing? And then pay what you feel comfortable paying once is refinanced. Try a credit union. Most of there rates range from 2%-17% depending on credit. Worse case scenario 17% is way cheaper than 28%!  

Comments

@humidistat11 at one point I tried a few places and NFCU but was turned away because Im upside down on it and they said it was too old.  

Answer 28

Call and apply all of it towards your principle. Then throw as much as you can to finish paying off the loan. When you’re done with the loan, apply those car payments ($438) to an emergency fund. You’ll have the $1000 in 2-3 months.  

Comments

@lapp37 Rodarte Posada thats was exactly my game plan but scared Ill be stuck with a $1k balance because Im unsure of how the interest will be. Ive been stuck for so long and Im not great with math  

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Knowledge is power. Don’t wonder about the interest-call the bank that has your loan and ask. Explain what you want to do and ask how they apply the interest. And ask what you would end up paying in the long run if you applied your tax return and had a remaining balance. They’ll be able to help calculate your remaining balance with interest.  

Answer 29

The more you can pay over your regular payment, the less interest will be charged. Then you can pay it off faster.  

Answer 30

My advice is take your tax refund and pay it all toward the principle. Then you'll just have maybe 3 more payments and it will be done!  

Answer 31

Apply it all! It sucks but you'll save so much money in the long run and get it paid off faster

Answer 32

Apply ALLLLL the tax return to the car and you can pay it off in like 3-4 months. And be done with it.  

Answer 33

Will this cover the full payment? If so get rid of it you can take that 438 and start saving

Comments

@soong No it doesnt cover the full payoff amount. I will still be left with about $1, 000 left

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@diadromous Thank you, yes I still would put the whole amount . 1000 left you would be finish your payment in no time.  

Answer 34

Pay the large chunk on the loan. Also it’s an amazing car! Great safety ratings and lasts forever. I have the Pontiac vibe which was made im the same factory in a joint partnership with Toyota.  

Comments

@salep58148 I totally agree! I absolutely love my little car. Its got 155k miles on it and it runs perfectly. Even take it to the car wash 2-3 times a week  

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@diadromous ours is a 2005 and at 211k miles. No issues with it.  

Answer 35

Make emergency fund and put the rest to the car

Answer 36

Throw it all at the car

Answer 37

Apply it to principal and keep making payments. Throwing any extra $ at principal until you pay it off.  

Answer 38

Agree with so many! Apply to PRINCIPLE-don’t let them use it towards interest. Then pay that sucker off in the next 3ish payments and be done!  

Answer 39

I have a few questions. 1. Do you have your 1k emergency fund. 2. Is this your only debt or your highest interest debt? 3. How upside down are you on the car? If you owe more than 2k to get caught up you might just want to pay that then refinance. If it's less than 2k I'd get caught up and then apply the remainder towards your principle. Either scenario if you dont have your emergency fund I'd do that first. Murphey is a jerk and he strikes when your starting to make real progress! Good luck!  

Comments

@parhe @jocundity Wallace I dont have a EF fully funded yet. I just started, so its only got about $115. I have other credit card debts, but this car payment is the worst that I have, and the highest payment. Kelly blue book says my car is worth $1400, and I still owe $5, 500 on the loan. I have looked into a refinance with a few banks and credit unions but they tell me my car is too old.  

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@diadromous go with your gut. I'd highly recommend getting that EF funded but like people have said you can do after. As much as it hurts to do it I'd use the rest to pay down the car. You'll save a lot of money in the long. But again, trust your gut! There isn't really a wrong answer here, you just have to do what most aligns with your financial goals.  

Answer 40

Apply the tax return to the car. You will help your credit and remove an account from your name. Plus your interest is less, so less to pay back now. Plus in the long run you will get your money back-save 250-300 a month into savings Just like you were paying a car pymt. You will earn that money back by sec or more that way.  

Comments

@starchy thank you for explaining the interest because Im scared to pay the $4, 410 and with a remaining balance being about $1k, that I will still get charged $200 in interest. Or will it be much less? I checked my loan and it said it accrues daily. So if I paid it down to a $1k balance and make nornal $438 payments, will it still be $200 in interest? I hope my question makes sense lol

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@diadromous interest is less.  

Answer 41

Def do what others say. principal! I would be afraid it would get spent on other things if u don’t use it right away! Good luck  

Answer 42

Pay it off!  

Answer 43

Call and insure that all that is going to principal

Answer 44

Principal 100% - just call and make sure it gets applied correctly