Imagine a life without repayments

[Image credit: Max Pixel]

Today I'm here to bust a huge myth. The myth that only geniuses can avoid having to make repayments. Plenty of people I grew up with just take it as truth that the only way to pay for something like a new car, is to get a car loan and spend the next 7 or so years paying it off. "The only people that can save for a new car ahead of time are 'numbers people'. It's impossible for the rest of us....." Sometimes a belief can be so common that we don't stop to challenge them. Not today! We're going to see if this belief still stands when challenged with a bit of maths. For this example we're going to use a common car loan scenario of $20,000 over 7 years, at 7.25% interest (per Canstar 2014 report). In this scenario, you will be paying at least $304 per month, more if you have loan fees to pay. By the end you will have paid $25,562!! If you can put aside $304 per month after the loan, why not put it aside beforehand? If you choose to put it aside in advance, you will pay the loan off in around 5 1/2 years. That's a saving of 1 1/2 years on the exact same car! Now here is the fun part... you don't need to be perfect. What I mean, is that if you're only half way there, then life hits hard, and you end up getting a car loan anyway.... you will only spend around 2yrs 10mnths paying off half of the loan. Isn't that amazing? Relax