How to Pay Off Your Car Loan Faster
Have you ever wondered how to make your car payment go down or how to pay off your car loan faster? If you do, you should really check out how the smart people deal with their loans. According to a research, 70% of people sign up for car loans to buy their new cars. Often, these car loans take almost one-third of their monthly income and they last for at least 48 months up to 84 months. If you feel like you are paying a lot of interest for no reason and don’t want to suffer for 84 months, perhaps you should check out these proven methods to pay off your car loan faster.
Method 1: Pay Your Loan Bi-Weekly
Instead of making payment every month, you can make bi-weekly payments. This is one of the fastest ways to pay off your car loan early because less interest will be accumulated when payments are applied more often. There are 52 weeks in a year and you will make 26 (or 27) yearly payments using bi-weekly payment method. In fact, you can also shave off the payment for last few months.
Method 2: Make Extra Payment Whenever You Got Extra Cash
Pay more is often the best way to settle your car loan early. You can do this whenever you got extra cash and that could save you a lot of interest. For example, pay $500 instead of $428 every month. At the end of the year, you can see an extra $864 is paid to your car loan in your statement. In order to make extra payment, you need to find extra cash, thus, work harder.
Method 3: Make a Large Extra Payment
Regardless of when you do it, making a large extra payment can help you to pay off your car loan faster. If your car loan interest rate is 5%, making a $10,000 extra payment could save you $500 dollars in a year. Do no overlook $500 because there are many great cars under $500 dollars.
Method 4: Round Up the Monthly Payments
Round up is one of the best techniques to pay off your car loan faster. The monthly payment for a $22,000 car loan with 5% APR and 84 months term is $310.94. You can actually shave off at least 11 months if you round up the amount and pay $350 every month.
Method 5: Refinance Your Loan
We mentioned about refinancing your car loan in Chapter 4 of our Car Buying Guide, Car Leasing versus Car Buying. Refinancing is the easiest and simplest way to pay off your car loan faster. Do a little research and find out which local banks are offering super low interest rates on car loans. If you are able to refinance your car loan from 6% to 2.5%, that will be a big saving. Refinance is also an awesome way to make your monthly car payment go down too.
Method 6: Pay Online or Sign Up Auto Payments
Nowadays, a lot of things have gone online. Many banks started to offer additional discounts if you pay your monthly car payment online or sign up for auto payments. Pay online or sign up auto payments is a good practice although it doesn’t help you to save a lot of money compared to other methods above. However, it did bring you convenience as well as little discounts.
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