The Amortization Experiment

I should call this "Fun With Amortization Tables".

Cliff Notes...I'm paying off my new car in less than one year and saving $10,000 in interest.

An amortization table is a document that tells you how much of each loan payment goes to interest and how much goes to principal.

On April 17th of this year I got a new to me...2021 Rav 4 with about 26,000 miles on it.

I asked the lender if I could get an amortization table from them and they said, "we don't provide those"

I think I know why.

Here's the amortization table for the first year of my new car...

My first payment was scheduled for May 28...40 days after I took delivery of the car.

As you can see if I paid it off in the "normal" way, after one year I will have paid back $5969.16 but only $2695.21 had gone to principal.

I didn't like that.

So I started to do some figuring.

How could I use the car to pay off the car faster?  (Think Uber, Lyft, Instacart etc)

I started looking at the PRINCIPAL column.

If I earned about $225 every week, using the car, in just 12 weeks I will have knocked one year off the loan.

After those first 12 weeks, I'd need to earn about $260 a week to get rid of another year in 12 weeks.

The next 12 weeks the average per week would need to be about $300.

Doing it that way I'd have the car paid off in approximately 72 WEEKS...instead of 72 MONTHS.

I LOVED the sound of that. (who wouldn't!?)

See why car lenders don't provide amortization tables?

But I really liked the idea of having it paid off in less than a year.

So I sharpened my pencil and much would I have to pay EVERY DAY to pay it off in a year?

I took the balance and divided it by 365.

The number was $64.80.

If I was able to earn just $65 per day, the car would be paid off in a year....without interest... BUT that's not how these things typically work.

Interest is accruing every day.

But since my first payment wasn't due for 40 days after I bought it, I started paying $65 every day.  

Every day is different but it usually takes me 1-3 hours to earn $65 with the car.

And that's not always in a row. 

I work from home normally so I wait for the $20+ gigs to pop up and take those.

I started paying back $65 per day because I didn't know if my first required monthly payment on May 28 was going to change.

It was scheduled to be $497.03 but by May 28th I will have already paid back $2600.

I didn't know if they would still require that $497.03 or change the amount due on May 28th or the due date itself.

I got my answer on the morning of April 25th when the due date changed to June 28th and the payment amount changed to $539.06.

At this point I had made seven, daily $65 payments.  ($455)

Since it appeared that if I continued to make daily payments I'd never need to make the big payment ($497.03) I did some more pencil sharpening.

I figured out that if I added just $10 to my daily $65 payment, the car would be paid off in less than one year....about 20 days short of one year.

So on April 25th I started paying $75 per day.

This morning my required monthly payment for, now June 28th, is back to $497.03.

But if I keep making $75 daily payments that date will keep moving farther out. (or is it further?)

On March 27, 2025 I'll have a 4 year old paid off car.  Sounds good to me!

Of course, I have several advantages over the typical person with a car loan.

-No kids.

-No spouse.

-No traditional job.

-Experience with side hustles where earning $75 is pretty fast and I get paid the same day.

And it doesn't hurt that I'm attractive, charming and witty...and of course humble.

So rather than dismiss the idea of paying extra on your loans, I hope you'll adapt this idea for your own situation and circumstances.

Get an amortization table for your loans and run different scenarios.

Just one extra payment PER YEAR...applied to principal...can dramatically speed up most loans....knocking years off of a mortgage and months off a car loan, saving you hundreds or thousands of dollars in interest.

I'm saving about $10,000 in interest.

So don't focus on what you can't to and do what you can.

Let me know how it goes for you.

I'll edit this article as the year goes by.

Update #1 - May 17, 2024 - Today marks the 30th day I've made a payment on the car.  One month down.  I've paid back a total of $2180 of which,  approximately $1920 went to principal and $270 went to interest.
Update #2 - May 28, 2024 - Today was the day my first payment was originally due.  (40 days after purchase) Since I've been making daily payments, the "next payment" is scheduled for August 28th.  I did forget to make a payment on May 21 but other than that I've continued to make $75 daily payments.  So far I've paid back $2930...$2500 of that went to principal.

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