How I Knocked 5 ½ Years off my Loan and Saved $12,000
January 25, 2010 by Mrs. Frugal
I own a boat. Or I should say the bank owns my boat as I’m 5 years into a 20 year loan. What? You didn’t know you could finance a boat over 20 years? Oh sure you can. Although 15 year loans are more common, 20 year loans are readily available for those of us that want more boat than we can afford.
Anyway, much like when I purchased a house or car, I didn’t consider what I would really be paying for this boat by financing it. All I wanted to know was could I afford the payment.
That was then. I have a new financial perspective now and I can’t stop thinking:
If I continue to make just the loan payments, I will end up paying $104,587 for this boat. That’s $57,500 plus $47,087 in interest!!! Gah!
Interest nearly doubles the cost! $104,587…for a boat! And it’s not even a fancy yacht I can use to cruise around the Bahamas. It’s just a wakeboard boat.
If you read my 2010 Goals you know that one of my objectives this year is to increase my monthly boat payment by $130. I wanted to do this without detracting from our savings contributions, so I had to look at other areas to cut back. With just a little effort we found a way:
- We switched to a lower cost health plan which saves us $50/month. We were in the top level plan and paying for services we didn’t need or use.
- We were able to save another $35/month by switching car insurance. I’m not loyal to any company so I’m always shopping for better rates.
- Canceling my smart phone data plan saved $30/month. It was nice to have but not a necessity.
After finding $115 it wasn’t a problem to bump it up to $130. By increasing our payment we are knocking 5 ½ years off the loan and saving nearly $12,000 in interest!
I feel good about our resolution to pay off this loan early. Instead of 15 years we will pay it off in 10. But if you go back to My Goals for 2010 you’ll see one of my medium term objectives is to pay off the boat in 5 years. I’m just not comfortable having this debt hanging around for 10 years. But to pay it off in 5 years we need to add $500 to the loan payment. Finding $130 in your budget is one thing, but squeezing out $500? That’s more of a challenge.
With a lean budget and a baby on the way, I’m not sure how we’ll do it. But I think we can find a way. Knocking 10 years off this loan and saving over $21,000 in interest is our motivation. Heck, being debt free is our motivation!
How about you? Have you found creative ways to pay down a large debt?
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Mrss Frugal – You think it’s time to sell the boat and find some friends that own a boat. Heck, maybe you could be friends with whomever buys your boat!
Ah yes, sell the boat. I would do that in a heartbeat. Unfortunately values have tanked and we owe much more than we could sell it for. So for now we can only focus on aggressively paying it down and then evaluate once we’re close to current market value.
First of all, that’s awesome that you have a boat for wake boarding, I love wake boarding.
Now back on topic. A lot of people probably don’t evaluate how much big ticket items will actually cost them like you did. I’m guessing if more people did that, there would be a lot more stories like yours! I know I am employing the same plan but with my student loans.
Impressive ways to come up with the extra money, though I don’t know if I could do without my data plan. I use GPS and Shazaam all the time!
Thanks MFO. No doubt with your focus and dedication you’ll reach your goals AND exceed them! I really like your site and especially the graphics. (I love charts!)
With our revised plan I think we’re going to pay off our loan in less than 3 years. We’ve even had someone we trust approach us to rent it for $300/day. That will help us pay it off even faster.
In the meantime we’ll just enjoy it. In the spring/summer it’s our primary activity. My husband and I both love to wakeboard and wakesurf and hopefully our son (due in May) will like it too!
Maybe I’m the only one who didn’t know this, but did you know that when they receive your payment determines how much interest you pay that month? I have been looking at our bank statements for our auto loans, and I noticed that when I have paid our car payment a week early, for instance, I’ve saved as much as $50 on interest that went towards the principal instead. What’s up with that!? The same is true for our daughter’s student loans. Don’t wait until your loan payments are due…pay them as soon as you have the money to pay them. It can save you hundreds of dollars or more a year!
Do you mind posting some pictures of your boat, or some pictures of the sea when you were on your boat?
I wanna see!
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