Caution: Possible Boredom Ahead (unless you're a geek like me)

Justin and I... okay who am I kidding, I decided to turn our Jeep loan that we have with Chrysler Financial into a line of credit at our credit union. We got a $25,000 line of credit to pay off the approximately $22,500 that we had left on our Jeep loan.

Basically, my plan when going in search of a new loan for the car was a lower interest rate that would either lower our payments or pay off the Jeep faster. Prime has plummetted since we bought the Jeep in November of 2007 (or rather, since Justin bought the Jeep for $5000 more than we had agreed upon without consulting with me... yeah that was a great day).

Our interest rate with Chrysler was 7.79, and now our rate is 5.25. It's not the kind of drop that we would majorly notice because the loan is so "small" (compared to our mortgage, $22,500 is nothing). Basically by the time we paid off the Jeep we would have saved around $1000 in interest. I was not overly impressed with what I was being offered.

At first.

Then I realized that this $25,000 is always available to us. Visions of IVF fairies began dancing in my head.

I also realized that with an LOC, we can have every penny that we have at our disposal applied to the LOC, and just pay our bills when we need to. This would automatically take the money for the bills out of the LOC. What that translates to is lower interest costs, because you only pay interest per dollar per day.

When we had the loan at Chrysler Financial I wasn't comfortable paying extra or putting our savings on the loan because I knew that money wouldn't be available to us if we found that we really needed it (ie. if I found myself unemployed... which I will in 3 months). Therefore there was no way the loan was going to be paid off before the 5 year ammortization period was up. I was just too afraid of getting rid of all our savings. I was too afraid we would find ourselves in a situation where we needed that money, and it would be gone.

However, because it's a line of credit, if we find either the next day or 25 years from now that we need the money we had previously applied on the loan, it is always available to us.

Here's the clincher though: all we have to pay on the LOC each month is the interest. Since I immediately transferred our $8500 savings onto it, we're only using $14,000 (keep in mind, our savings were quite small because we have paid off about $50,000 of loans in the past 18 months - not including our mortgage or down payment). That translates to about $56 a month in interest. Once we get our $5000 in taxes back and put that on the LOC, it will be $36 a month.

I am a complete freak about debt, so I will put every penny possible on the LOC and not just take advantage of it. But I do love the fact that our necessary payment each month is so low.


I'm not going to pretend that that entertained anybody but me. If you've actually made it to this point, I apologize if I've bored you. I'm a total financial nerd. Budgetting and paying off debt really excites me.