Paying off your car loan faster helps you save a lot of money. Here are 5 proven financial tips to pay off your car loans early.
Most of us depend on different types of loans for many of our day-to-day needs. Thousands of dollars in credit card repayment, a hefty mortgage, monthly car loan instalment or a loan debt are part of daily life for most of us. You may end up paying a lot of your hard earned money settling debts. It can be frustrating at times to manage your outstanding loans.
Fortunately, there are less well-known but brilliant tricks that you can employ to lighten the load. These techniques can be applied to pay off your car loan, credit card outstandings, home mortgage and any such debts quicker than usual. They won’t harm your routine financials, yet make a big difference to the interest that may add up on your loans. Check out these 5 proven strategies that can help you pay off your car loan faster. A small caution of advice — check with your lenders before paying off any loan in advance, as they may attract penalties.
- Make Two Payments in a Month
Divide the total monthly instalment into two and make payments every 2 weeks. This way you will be self disciplined. The earlier you make a payment, the less interest is accrued. On a car loan that spans 7 to 9 years, this can make a big difference. A good practice is to make payment by the first working day of the 1st and 3rd week of a month.
- Round Up the Instalment Figure
It is advisable to round up your monthly payment amount to the nearest $50. This won’t have any tangible dent in your household budget, but can significantly bring down your loan tenure, by a few months earlier! For those who can round up the amount to the nearest $100, that’s an even better scenario.
- Make an Extra Annual Payment
By the end of the year you can keep aside an amount equivalent to the monthly instalment of your car loan. This can be paid towards the car loan. If the idea of bi-monthly payment seems daunting to you, then you can try this strategy. Channel your additional income from bonus, tax refunds or interest earned over savings towards this goal. A lengthy loan can thus be shortened by a few months.
Another way to do this effectively is to divide the monthly instalment amount by 12 months and add them to the original monthly repayment amount. This will reduce the ‘burden’ of additional annual payment.
- Refinance with Better Rates
We tend to forget the applied interest rates once the loan is approved. Over time, rates might change and better rates might be available in the market. Positive changes in your credit score also attract better interest rates. It is a great idea to check regularly for refinancing options for your vehicle. Once you switch to a loan provider with lower interest rates, you should stick on to the combined options mentioned earlier to reap the benefits of refinancing.
- Channel Extra Earnings
In the modern times, everyone is looking for additional income to support various needs. You may be a student, working adult, family person or retiree. Whichever demographics you belong to, there are ways to top up your income through part-time jobs, businesses, investments and savings. Take up some such better paying side chores with the intention of paying off your loan faster. Even a job that helps you allocate $200 extra per month towards loan settlement is a positive step.
Win over your loans by using one or more of these tips and shorten by a few months or even years. Pay less interest and gain the privilege of a debt-free life. You deserve to have full access to your hard-earned money!