Six Year Loan in 10 Months

Back in October, I mentioned that we were taking on more debt.

Our plan was:

We now have a car loan for $21564.  Our plan is to sell the Caliber for $9500 and the F150 for $6800.  That will leave $5354.  We have a beneficiary IRA that has to be cashed out relatively soon, so we’re planning to do that early in January to push the tax burden to next year, which will end the loan.

How has that worked out?

We made the final payment on the Tahoe today.  Our first payment was December 10, 2012.   It took us 10 months to pay off six year loan.

We had initially hoped to have it paid off by March.   That didn’t happen.  Our plan didn’t work, so how did we do it?

Here’s what happened:

We sold the F150 for $6400, cash.

We still haven’t cashed out the IRA.

We sold the Dodge Caliber for $8500, but….

(This is where the story starts.)

While we were fixing up our rental house, we met quite a few repairmen and installers of various expensive doo-dads.   Several of them were interested in buying the Caliber.  One of them convinced my wife that we should accept payments for it.   That’s a mistake we’ve made before, but we decided to make it again.

We wrote up a loan agreement, listed ourselves as the lien holder on the title and sold the guy a car for $1500/month with no interest.  It was supposed to be paid off in just a few month, so it didn’t seem like that big of a deal.

He made two payments, then disappeared for a while.

When he re-materialized, he told us he’d been in the hospital and had lost his job.

Crap.

When the time came to make his next payment, he told us he was going into the hospital for a couple of weeks, and he’d work something out after.

It’s “that kind” of hospital.  The dry kind.

Suddenly, it was May and he was telling us his sister would help make payments because drinking yourself into rehab once a month makes it hard to keep a job.

Stories, excuses, BS.

Finally, we got sick of it.  I like helping people, but I despise being lied to.

Repo time.

In Minnesota, if you’ve ever taken action(or not taken action) that would make it appear that you were okay with a modified payment plan contrary to the loan agreement–for example, not taking the car back after the first missed payment–you have to send a “Letter to Cure”, which is a 10-day notice of intent to repo.  This gives the customer a chance to make things right.

On day 8, he called us, fresh from rehab, promising his sister would help him out.   On day 10, she called.  Her business had been broken into and she was working that out, but she’d arrange something with us after the weekend.

Crap, that sounds like more excuses.

Remember, this was already August, and the car was supposed to have been paid in early April.  We’re such suckers.

By the middle of the week, she called and said she’d make the payment.   My wife and I decided that we’d give her three days, then go take the car.   On day 2, she said she was overnighting money.

On day three, we got a check and two postal money orders to cover the balance.  $4500.

Today is the 10th day from that deposit.  The check has cleared, and payment is off to the bank, killing the loan.

But wait, 4500 + 6400 is only  $10,900.  That leave $10,664 unaccounted for.

From the beginning, we were making double payments.  Instead of paying $425 per month, we paid $850 most months, except when things got a little tight over the summer.    The tax refund we got that we weren’t expecting also went to the loan.   Every extra dollar got sent to the bank, because we weren’t sure how the car loan drama was going to end.

Taking the cars we sold out of the equation, we still paid off the remaining $10,664 in just 10 months.   Interest payments came to about $300, which the buyer of the Caliber says he wants to pay us, but I’m not counting on it.

So again, we are debt free and have just freed up $850 in our monthly budget.  Half of that will be getting saved for the next car, and half will go towards our other savings goals.