What would be the best to pay off House/Car debt

[Friedpet]

My question is not really answered here, i would like to ask it in this same thread, please.

If i have money in a bond which i can use to pay off 50% of my car, then is this a good idea?
If i did this i would have no savings at all left over, besides some coins i have maybe valued at 30k.
The house is a longer term and the car a shorter one, but the car is at 2% higher than my house.

Please give me suggestions here , what is the best approach here , please?

You would save more paying off your car first, but dont sacrifice your emergency fund for this. Keep 3 months' salary in your bond, move the rest into your car loan.

 

[ichocolate]

In most countries the best way to pay off a bond or car is to get a job. In south Africa it's much quicker to join the ANC and have the Gupta pay it off for you, or knock over an ATM, hold up a cellphone or jewellery store, or hijack a few cars.

I love this answer

 

[ichocolate]

View attachment 454928

This table shows a R2m bond over 20 years.

The first column shows the total amounts paid off if you don't pay it off early.

The second column shows what happens if you pay an extra 3k per month. This saves you 6 years on your bond, 971'000 in interest, 5000 in fees

The third column is OP's option of paying an additional 10k per month. This saves you a whopping 1.7 MILLION in interest over 9 years, saving you 11 years off your bond and 10k in savings.

Show me an investment that can beat that.

This is a very insightful way to represent what you are really paying for if you cant afford extra k every month.

 

[Icarium]

View attachment 454928

This table shows a R2m bond over 20 years.

The first column shows the total amounts paid off if you don't pay it off early.

The second column shows what happens if you pay an extra 3k per month. This saves you 6 years on your bond, 971'000 in interest, 5000 in fees

The third column is OP's option of paying an additional 10k per month. This saves you a whopping 1.7 MILLION in interest over 9 years, saving you 11 years off your bond and 10k in savings.

Show me an investment that can beat that.

To play devil's advocate, if you can find somewhere to invest that R10k each month that will give around 7.85% PA return (after tax) you'll end up in the same situation of being able to pay off your bond after 9 years.

 

[ichocolate]

I am wanting to know how to deal with paying off a car and home.
I am in a bit of a tricky situation because i dont want to use my savings on my car but it looks that way if i want to save on paying interest. Unfortunately i had to get a car not long after i bought a house because my car i had was very very old and had a few small and maybe bigger problems that might have crept up unexpectedly. I tried to hold on for 2 years after i bought the home, but i fell short , about 1.7 years.

So now, i have this car i need to pay off in 5 years and my house in 18 years,
I would like to know the best thing to do here.

I am in no way living a luscious life and eating out or going to the casino or cinemas,

I have cut down on almost all i could, like DSTV 3 years ago and i only pay for basic monthly items like Telkom ADSL....Cell Phone Contract....etc

I was thinking to settle the whole car but then i would have absolutely no emergency money at all, BUT i would not be paying interest i guess? But it would be extremely sad to let go of money i have saved for years and years.
I am trying to work out other scenarios like paying only a portion off like 50% of the car.

I am not sure how to calculate this stuff and i am not sure what i want to do and what the proper thing to do here is because the house is most important to kill but i have this car now which is a real bug , but i needed it because i travel at nights also, and no place is safe to break down anymore in this place.

Appreciate the help here and ideas on what to do , please.
Happy to PM the details if it is needed.

 

[supersunbird]

Here is my idea.

Use the savings to pay as much of the car that will leave you with at least 2 months worth of emergency savings still. Then ask the to lower your monthly instalments and keep the period the same, you wil then have a lower monthly instalment and you can plough the difference back into your savings.

Then when you have 4 months of emergency savings again, do the same again.

 

[saturnz]

To play devil's advocate, if you can find somewhere to invest that R10k each month that will give around 7.85% PA return (after tax) you'll end up in the same situation of being able to pay off your bond after 9 years.

but where ever you are going to invest, there will be a risk factor, something which is greatly reduced with accelerated bond payments, infact the risk is negligible compared to anything else

 

[ichocolate]

Here is my idea.

Use the savings to pay as much of the car that will leave you with at least 2 months worth of emergency savings still. Then ask the to lower your monthly instalments and keep the period the same, you wil then have a lower monthly instalment and you can plough the difference back into your savings.

Then when you have 4 months of emergency savings again, do the same again.

Sorry man i dont understand, please give me steps or tellme again in another way,
appreciate it.

I have read it a few times what u said, i just dont quite follow.

i dont want to assume and say yes i get it.

 

[ichocolate]

but where ever you are going to invest, there will be a risk factor, something which is greatly reduced with accelerated bond payments, infact the risk is negligible compared to anything else

This is what i learnt unfortunately 1 year too late damit, i then closed all my savings and put it all in my bond. i wish i had known this 1 year earlier, very pissed off about it.

 

[supersunbird]

Sorry man i dont understand, please give me steps or tellme again in another way,
appreciate it.

I have read it a few times what u said, i just dont quite follow.

i dont want to assume and say yes i get it.

You said you have savings, if you use it all to settle the car you will not have any savings.

So use your savings, but not all of it (so you still have emergency money, I suggest whatever you feel is 2 months worth of emergency savings, must be left over), to pay a big amount into the vehicle.

Then the difference in lower payments, you save up again for a while in your emergency savings.

 

[ichocolate]

You said you have savings, if you use it all to settle the car you will not have any savings.

So use your savings, but not all of it (so you still have emergency money, I suggest whatever you feel is 2 months worth of emergency savings, must be left over), to pay a big amount into the vehicle.

Then the difference in lower payments, you save up again for a while in your emergency savings.

I was thinking to ask the bank to lower my home installment by 1 thousand rand and then pay that 1 thousand rand in to the car instead.
This way i dont get rid of my savings in my bond in the home?
not sure of that idea?
The best is to settle the car completely? i would think.... but then that money u have in the home no longer is there to help kill interest?
Very tough hey , really.
even settling half the car , its a lot of cash to just throw at the car .
I guess just paying the min installment would be dumb also because you are still paying the interest off .

i really dont know now what the best plan is here ;-(

 

[The_Mowgs]

I was thinking to ask the bank to lower my home installment by 1 thousand rand and then pay that 1 thousand rand in to the car instead.
This way i dont get rid of my savings in my bond in the home?
not sure of that idea?
The best is to settle the car completely? i would think.... but then that money u have in the home no longer is there to help kill interest?
Very tough hey , really.
even settling half the car , its a lot of cash to just throw at the car .
I guess just paying the min installment would be dumb also because you are still paying the interest off .

i really dont know now what the best plan is here ;-(

The problem is emotional. All that cash you accumulated took time and you think you will feel sad if you used it all now to settle most of the car.

Settle the car in the way supersunbird explained, keeping enough money back to cover 3 months expenses.

 

[ichocolate]

The problem is emotional. All that cash you accumulated took time and you think you will feel sad if you used it all now to settle most of the car.

Settle the car in the way supersunbird explained, keeping enough money back to cover 3 months
expenses.

You said you have savings, if you use it all to settle the car you will not have any savings.

So use your savings, but not all of it (so you still have emergency money, I suggest whatever you feel is 2 months worth of emergency savings, must be left over), to pay a big amount into the vehicle.

Then the difference in lower payments, you save up again for a while in your emergency savings.

Okay so thats it then, i guess ...
I will then settle most of the car - and keep 2-3 months Salary.
In my case my salary is completely used up and im lucky if i spare any couple or few hundred rand.

Sorry Supersunbird, i dont think i get this?
"Then the difference in lower payments, you save up again for a while in your emergency savings."
Please explain what you mean...

 

[supersunbird]

Say my Figo cost me R2200 pm.

I then pay a huge amount in and now the monthly instalments are R380 pm (same period of repayment kept, if you kept the payment amount the same then the period would be shorter).

The R1820 less I'm paying per month for the car must thus then be saved up and then paid in again (hopefully settling it).

 

[ichocolate]

Say my Figo cost me R2200 pm.

I then pay a huge amount in and now the monthly instalments are R380 pm (same period of repayment kept, if you kept the payment amount the same then the period would be shorter).

The R1820 less I'm paying per month for the car must thus then be saved up and then paid in again (hopefully settling it).

Not really getting it, or maybe i do.

example 150 000 - 75 000:
So i pay 3000 over 5 years, i then pay some 75k odd in to the loan so my outstanding facility is 150k-75k now.
I then continue to pay 3000 as i was?
I do not pay minimum installment right ?

Is this what you are saying?

so that said, this below comment is automatically achieved: ?
The R1820 less I'm paying per month for the car must thus then be saved up and then paid in again (hopefully settling it). ?

 

[supersunbird]

Not really getting it, or maybe i do.

example 150 000 - 75 000:
So i pay 3000 over 5 years, i then pay some 75k odd in to the loan so my outstanding facility is 150k-75k now.
I then continue to pay 3000 as i was?
I do not pay minimum installment right ?

Is this what you are saying?

so that said, this below comment is automatically achieved: ?
The R1820 less I'm paying per month for the car must thus then be saved up and then paid in again (hopefully settling it). ?

You can pay the same for a shorter period (and then once paid off save the payments) or pay less pm over the same period (and save the difference, an option that gives more flexibility in my opinion), both will save you interest.

And no, you will have to consciously save lol.

 

[ichocolate]

You can pay the same for a shorter period (and then once paid off save the payments) or pay less pm over the same period (and save the difference, an option that gives more flexibility in my opinion), both will save you interest.

And no, you will have to consciously save lol.

So this is my challenge is that i needed a car and explained my story with what i wanted and didnt want considering my kid and stuff and space (i dont travel and go on fishing trips, but i dont want to go backwards from what i have and i did struggle a little if i needed to put something in the car and of course i was considering my kid). Reliability was the main thing and because i drive late in the evenings.
but i knew i could not afford it and my budget was about 2500 installments and not 3300 which they are now.
I got it because i knew i had some bond money but obviously i would love to keep it in the bond rather than the car and it is accessible if i needed it.

Tough times ma, very hard to work out things. i had an idea what to do BUT i wanted to ask the experts on here like you

its my precious savings and i cant save and restore like in leisure suite larry , if i die.
I dont have any fall back also , no family and stuff i mean.

So was particularly looking at ratios like a 50/50 or 70/30 type of thing , or even full settlement BUT of course i would have no savings then.

Disposable income is non existent as i previously said im very lucky to come out at the end of the month with a couple hundred rand honestly.
which is why i know i would never be able to build that cash back in any time soon, or even before my kid starts school.

I didnt want to by a car with higher mileage and or even an older year model as an option because i would get the point in the lifetime of the car quicker where this and that is an issue. Though cars are a gamble anyways.

What i wanted to do was to settle full then keep paying that amount BUT less 1000 because its what i could afford..... BAck in to the bond..... but obviously i would start at 0 again which really sucks and i have no emergency money for whatever , hole in the roof, gate falling off, dog to the vet , extend drive way , fix tap , paint for roof , whatever....

For now i am just checking if i can pay the car off on the current set installment....

my one idea was to try lower the bond becaUSE i probably can by 1 grand , and then use that towards the car to get it paid quicker also ( and then include your method of paying a portion (like my ratio i mentioned) say 40% towards the car , to contribute)
and then of course make sure i have 2 - 2.5 3 salaries available.

yah boet, *deep thoughts*

 

[Work in progress]

I'm in this exact situation and am attacking the bond with all I have, simply because I can access the money for emergencies, plus the interest saving (rand value) on the bond is way more than that on the car. So I'll finish paying for the car and the house in the same year (five years from now). I committed to additional payments and asked the bank to increase the debit order. I also pay in whatever money I have in my transaction account after my monthly obligations have been met.

 

[milan188]

If you have an access bond use that facility to pay off your car. I assume the home loan interest rate is less than the car loan interest rate. So after doing this you still remain in the same level of debt but a lower overall interest rate.

 

[LOTR]

Use of access bond will increase your monthly premiums though