Refinancing is the word!
Recently I was helping a friend analyze her monthly spending so we could find a way to reduce some of that. Two big things were: Car and Student loan. I’ll talk about the student loan in a latter post, but let’s talk about Car loan here.
She got a new Toyota last year, with a monthly payment of $373. At the time of us looking into this, there were 65 more payments to go; we did the maths and my first thought was refinancing, and second was credit union. [If you don’t have an account with a credit union, I recommend getting one – a lot of credit unions have open membership, and it’s difficult to beat their APR.]
Few weeks, and a little bit of paperwork later, her new monthly payment was 334 for 60 months! Here comes the Savings: [Drum-roll…] (373 * 65) – (334 * 60) = $4205
Considering the time value of money, the total savings is less than the one mentioned above, but now you have a fair idea about how effective refinancing can be! To put it in a perspective, let’s say it took her 4 hours of work from beginning till the end of the process. Given the savings of $4K, the effort was worth $1000 per hour. How many jobs in America pay that much?!