How I Paid My Car Loan Off in Half the Time

In September of 2009 I was in a major car crash with two other vehicles. A driver ran a stop sign at 50 miles an hour, smashed into another car that skid into my lane and collided into me.

We all walked away from the accident, but the police officer told me if I didn’t swerve away from the driver’s side, I would have been instantly killed.

All three cars were completely wrecked and were unable to be driven again. I traded in my first car to purchase this vehicle, which is now nothing more than scrap metal.

So being forced to go car shopping again was not exciting to say the least. I found out I was unprepared financially for an emergency situation like this.

Purchasing another car was definitely not on my to-do list, as I was working to get out from under my consumer debt.

Benefits of Car Insurance

The one upside is that I had some equity in the car after the insurance sent me a check, so I was able to put some money towards the purchase of a new vehicle.

I loathe having to take out loans, but since I was in the midst of paying off debt I only had a starter emergency fund in place ($1,000) which I wasn’t going to touch.

So with this accident I was left with no car, only $6,000 cash but a fairly decent credit score. I found a new 2010 Scion TC, that stole my heart and I decided I just had to have it.

Refinancing Details

Fortunately I was able to put extra towards the principle each month. I was getting anxious to become completely debt free, so in January 2011, I decided to refinance my loan to help pay it down even quicker.

I was able to cut my 5.75% interest rate to a loan with 3.49% interest rate. Which was very worth the savings (and $75 loan fee) to me.

I went from having to pay $1,413.22 interest over the life of the loan, to only $774.85 which is a $638.37 savings.

By leaving the automatic payments the same (paying the same amount as before), I was able to pay off my loan 3 months sooner, all without putting extra money towards it.

That is priceless. If everything still goes according to plan, I paid off my car loan in May 2013 and officially became DEBT FREE!!! 

Photo Credit: zigazou76
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About the author: Carrie Smith is the financial artist and editor behind Careful Cents. She helps creative entrepreneurs make a living with their creations, and reach financial freedom through systems and financial organization. She’s been featured in The Huffington Post, Glamour Magazine, Kiplinger Finance and several other business websites. In May 2013 she quit her full-time accounting job to pursue entrepreneurship and blogging. You can find her on Twitter or Instagram @carefulcents.

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  • ImpulseSave October 4, 2011, 8:35 am

    How new was the car that was totaled? My mom and sisters were in a small accident last winter (just bad enough to wreck the car, but not enough to injure anyone!) just two months after the car was registered. It was so frustrating that their brand new car (used, but new to them!) was now out of commission. Take head: new cars are not immune to accidents!

    • Carrie October 4, 2011, 11:24 am

      My new car that was totaled was only 9 months old. It’s very sad and frustrating when a brand new car is completely wrecked. :(

      Thanks for commenting

  • Martilyo October 5, 2011, 11:58 am

    Becoming debt free is an awesome goal and one that I am working on myself. There are things that are true in life and not provable with science. Cars drive better when they are 1. Just washed and cleaned inside and out 2. When they are paid for. Somethings just can’t be explained… I am glad you made it out of your accident without injury :-) Good post!