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When borrowing a large amount of money for a house or a car, make sure you get a loan with no prepayment penalty. Then you should always pay more than the minimum payment. An additional 50 dollars a month can shave years off a mortgage or car loan.
It will also eliminate a lot of interest money on your mortgage if you instruct them to apply the extra money on the principle only. My friend just paid off a 30 year mortgage on her double wide mobile home in 7 years and saved $83,000 in interest.
Harlean from Arkansas
When we had our home mortgage, we had this fee (no choice), but ours only amounted to $8.00. We still paid our mortgage off early, since the $8.00 was a drop in the hat compared to what we saved. I understand that this penalty is often extremely high.
We have a car loan thru toyota and they wont let us pay down on it. When I pay extra they just mark it as credit and lower the payment for next month.
I disagree in some circumstances with prepaying your mortgage. Currently, the average 30 yr mortgage rates are about 6-6.5%.
Historically, the return on stocks have been about 10% annually. Additionally, since you get to deduct interest you pay on your mortgage, the actual rate of your mortgage would be about 4.6-5% [assuming a 25% tax bracket].
If you have high interest rate CC's or/and high rates on your car, then pre-pay those off, otherwise invest the money.