2009 Debt Snowball Challenge

At the beginning of the year, my husband and I decided that this would be the year we would replace one of our SUV cars with a minivan.  We would like to have another child and there was no way a third car seat would fit in either car.  This was a planned purchase and one we have been preparing for the last two years.

Two weeks ago my husband got us an AWESOME deal on a new Toyota Minivan. He found us a 2009 Sienna LE with 800 miles on it for $19,500. What a steal right? you won’t believe where he found it: on Ebay. Yes! we bought our new car online, without even looking at it or test driving it. In fact, the car was not even in this state, he had to fly to NY to get it and drive it back home to WI. I realize this is a fairly unconventional way to buy a car for most people. But just so you know, according to Bankrate.com, Ebay Motors is the largest used car seller/lister in the United States. This is not the first time we bought a car online either. Four years ago we bought his Jeep through Ebay as well. My husband is very diligent in doing all the research necessary and because of that we are confident in the purchases he makes. This was our biggest purchase online though, and of course we took care of everything to make sure we were protected.

Although we had enough money in savings to pay cash for it, I have such little confidence with the current economic situation that I didn’t feel comfortable draining our emergency savings fund for this, so we took on a car loan.  But we are intent in paying this off ASAP and that’s why our financial goal for 2009 is to pay off this car loan in six months and we are going to use the Snowball Debt Pay off Method to get rid of this loan.  If you haven’t heard of the Debt Snowball Method, I want to direct you to this Primer Jamie from Paid Twice wrote about it.  If you have debt and would like to pay if off quickly, this is a concept many have found useful in their debt-free quest.

Our car debt numbers break down like this

$21,500 amount of car loan
plus $600 interest cost of loan over next six months
less $4000 ->We have been saving for a family car for the last two years.
less $4400 -> from tax refunds and other money owed to us
less $4500 -> from sale of my husband’s car
= $9200 amount of loan outstanding after cash contributions

Our car payment is $410 a month.  Last week we refinanced our home loan and that freed an extra $150 from our budget that we can send to this loan.  We are also stopping cash savings for this period of time.  In total we can pay $680 a month until the car is paid off.  Six monthly payments should knock down $4080 from the amount we owe.  That leaves us with $5,120 that we have to come up from our income over the next six months to pay off the car loan.   Here’s where the concept of snowflaking is going to pay off for us.  We plan on just going on a barebones budget for the next few months, create surpluses and send any extra money we can scrape off to this loan.

This is the first time we are doing something like this.  But as I told my husband, it is not a challenge if we don’t push ourselves to the limit.  I am sharing this with you not to show off but to make myself accountable to this goal.  When I first met my husband, I remember he would tell me that a car loan is one of those things that is always part of people’s budget.  For a long time, I bought into that.  I don’t anymore, we don’t anymore.  By saving diligently and planning carefully you CAN break the cycle and get rid of your car payment.  This is what this challenge is about: to show you that it can be done.

Share This Post


  • Great post! We don’t buy into the american reasoning of always having a car payment either. We own our cars and vow to never have a car payment again. It sounds like your family got a fabulous deal!

  • Miss

    You should check out daveramsey.com He has a radio program and a new tv program. He is all about wiping out debt and has a Debt Snowball technique. He is very inspiring!

  • Mercedes, After all your contributions to reduce the loan to 9200 -would you not pay cash out of your EF for the balance and then pay yourself the $680 to replenish the EF – Would this not save some more on interest? I’m new to this concept and just curious.
    Thank for a great post – it gets me to thinking how to pay off a couple of bills that we have hanging over our heads that I have goaled to pay off by end of this year.

    • Nancy, the reason I don’t want to do that is not to drain our emergency fund. the way things are right now, who knows what the future may hold and we would like to be prepared. We prefer to aggressively pay the loan.


  • Way to go! We’re paying off our credit card debt (10,100K total) and my car loan (about 1300 something left) off this month and early next month. I am SO EXCITED!

    If we’re able to refinance our condo too, that would be about another $142 a month….All in all, the credit card payment, the car payment, and the potential $142 would tally up to $612 extra a month! I think I might try and save some, as well as get my husband’s student loans paid off early…seeing as I have 48K currently (and growing) in student loans myself. It would be really nice to pay cash for my grad school, even. 🙂

    Oh, the possibilities once you get some debt knocked out of the way, no?

  • Good luck! We’re working on paying off our car loan early as well. Our loan terms state that if we pay it off in under 36 months (we intend to), then we’ll have to pay a 1% fee. No biggie, but it’s something to check into.

    • Thanks for the heads up Kacie. I double checked with my husband and there’s no penalty for prepaying. phew!

  • Oh and of course, be sure your extra payments are marked ‘principal only!”

  • chris

    Mercedes that was a GREAT post. I agree with you that it CAN be done, and I look forward to hearing about your progress. I think you have given a lot of people something to think about today. It is so refreshing to read about someone who feels the same way I do about debt.

  • Stephanie

    My husband and I decided that we were going to pay off debt as well. Through our church we are taking the Dave Ramsey course called Financial Peace University. He is very inspiring and makes you totally think differently about your spending habits and saving habits. We are currently doing our Debt Snowball as well. We will be debt free (except the house) in about 1 year! Dave uses the expression Gazelle intense. We are SO Gazelle Intense! We are incredibly excited!

  • Deb

    A Debt Snowball is when you have more than one bill and you pay off lowest bill and take what you were paying on that and apply it to the next lowest and so on and so on. Thus, the snowball!

    Kudos to you folks taking FPU! It’s an awesome program. I’m blessed to be a facilitator and I’ve seen the Gazelle Intensity in action…it works!!

  • We need to replace our minivan and hope to do it by the end of the year. Currently we have about $550 in savings for it. I hope to have $10,000 saved by the end of the year, we will see how close I get! We might do what you are doing and take out a small loan at the end of the year and then pay it off quickly in the spring. Not sure yet, let us know how you like the Toyota because that is one of the ones we are looking at. I know you can do it! Good luck!

    • I’ll let you know Jennifer, I am new to minivans so it’s a learning experience for me still. I do love the room though.


  • Lisa Fischer

    Great post. For Xmas a couple of years ago, my parents gave each of their six kids & a few of the older grandkids, Dave Ramsey’s TOTAL MONEY MAKEOVER book. My husband read it in a couple of days & got right on it….it took me a few weeks but I finally gave in & read it as well. Sad to say, but we were the ONLY receivers of the book that read it. And the funny part, all of those that got the book deal with financial issues…except for my husband & I. My only wish is that I would have been given that book 15 years ago when dh & I first got married. Even though we have done so well, there was a LOT more we could of done.

    We are also believers of paying in cash for big ticket items. We’ve had one car loan (borrowed the money from my sister & paid her more than the interest at the bank but less than what a loan would have been for us). Our last van purchased 2 years ago (around $18k) was paid for in cash. My husband believes that if we can’t pay for it, we don’t need it!! We have the one nice vehicle & he drives a 1995 Geo Metro that he paid $2000 cash for & when gas was near $4.00/gallon, he could of probably sold that thing for more than he paid for it! LOL

    And I like how you stated that you are not showing off, but stating this IS something a person can do. Like us, we have 4 kids, one measly income of $35,000/year & are living comfortably in this wretched economy. The only debt we have is our mortgage of $110k. Our monthly pmt is still based on when we had two incomes ($720/mo) & haven’t had any problems paying that. Now if we’d have a $300-400/mo car loan….we’d be hurting. I think that is what hurts people, paying one or TWO loans and a boat, RV etc & then they wonder why they are broke!? HELLO!

  • Kelly

    Mercedes, I am curious about an aspect of buying a car on ebay. With any other ebay purchase, I am totally committed if I bid. Is it the same for a vehicle? Since the distance is too far to personally check the vehicle before the end of the auction, what recourse do you have if it has a problem that should have been disclosed? Leaving negative feedback would just not be enough!

    Also, as for minivan opinions, we have a Nissan Quest and we love it. We don’t understand why it has not grabbed more of the market than Honda or Toyota. The specific reason we bought our 2004 model (new) was that we could get the DVD player at a standard trim level. To get the DVD player on Honda or Toyota, we would have had to spend thousands more to buy the upgraded trim package.

    Minivan vs. SUV: My brother has a Ford Expedition and I looked up cargo space on our two vehicles. The Quest has about 1/3 to 1/2 more space because its floor is so much lower than the Expedition. People get SUVs because they need to haul a bunch of stuff but guess what, a minivan has a lot more space. Just my two cents worth.

  • charlene

    Hi Mercedes,

    We did the debt snowball a few years ago to pay off our cc and cars. One thing that was really motivating to me was having a simple sheet of paper on the fridge with the running balance. Everytime we could squeeze and extra $100, or $20 or whatever I would take a pen and update the balance. It was so motivating to have the balance constantly updated and to face the challenge every morning. We actually got notices from our CC company that I couldn’t make any more payments because I would be paying toward the balance several times a week 🙂

  • Hi Mercedes,

    This was a really cool post. I still have a car loan and a student loan in addition to our mortgage. I’d really like to pay off the car at least so we have more money to put in an emergency fund and towards our mortgage. Thanks for the good information!

  • Pingback: Debt Snowball Update! | Common Sense With Money()