Strategy 57 of 107
Re-shop auto insurance and send the savings to principal
What it is
Get at least three quotes for the same coverage.
Steps
- Get at least three quotes for the same coverage.
- Ask about bundling, safe-driver, low-mileage and usage-based discounts.
- Send the monthly difference to principal.
Repeat: Every renewal.
Measure: Monthly premium saved.
Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Cheaper can mean less coverage; compare limits, not just price.
- Usage-based programs can raise rates for some drivers.
Who it fits
Average household, Higher earners, Higher net worth, with assets, Business owners, Newlyweds, Married couples, College students, Single, Grandmas and grandpas (62 and over), No high school diploma, No college degree
Needs
Any homeowner with a mortgage.
How predictable
Depends on people or program rules (tenants, family, IRS records, lenders)
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: get at least three quotes for the same coverage.
Suppose it brings $600 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 16 years 3 months instead of 30 years, saving about $196,219 in interest. To finish in five years, they would still need about $3,374 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sources and more information
- NAIC: A shopping tool for auto insurance content.naic.org
Where to get help
- CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov
- NAIC: Find your state insurance department content.naic.org
- CFPB: Submit a complaint about a lender or servicer consumerfinance.gov
Related strategies
- 56. Raise insurance deductibles once a reserve covers them
- 55. Phone or internet discount through Lifeline
- 54. Energy bill help through LIHEAP
- 60. Claim your state's property tax credit or circuit breaker
- 53. 65 and over with limited income: let a Medicare Savings Program pay the premiums
- 66. Audit the servicer: make sure every extra dollar hit principal