How to Finish Paying for Your Car Loan Earlier
Being stuck on a 72-month auto loan can be quite tiring. It also prevents you from making other big financial decisions because a significant portion of your income is tied toward repayments. Follow these steps if you want to finish with your auto loan earlier.
Check the Fine Print
If you have yet to sign your contract and are thinking of paying off your loan sooner if your finances permit, check to ensure that you are allowed to do so without incurring penalties. But if you’ve already signed, the best you can do is calculate for various scenarios. Compare the costs of paying off the loan early with fees against the amount you’ll spend if you stuck with the original payment schedule.
Choose a Biweekly Payment Scheme
It’s easy to think paying half every two weeks is the same as making full monthly payments. But when you do the math, you’ll find that you’re paying an extra month in a single year just by following a biweekly schedule. Since there are 52 weeks in a year, you could make half payments 26 times in the biweekly option, equivalent to 13 months!
Find Extra Sources of Income
Getting out of your auto loan can be done more quickly if you have more disposable income. Consider taking on side gigs during the weekends and saving your bonuses to add toward your loan payment. Every year, consider putting in a significant amount to reduce your outstanding balance and decrease the interest over the life of the loan.
Do Not Take on More Debt
When you’re making progress or almost over with one debt, making another huge purchase can be quite tempting. Resist the urge and reserve that money to pay off your auto loan first. If possible, pay for everything else in cash.
Refinance When It Makes Sense
Refinancing a car loan could hurt one’s credit score, but this usually happens when the purpose of the loan is to borrow against the car’s equity or to lengthen the term for lower monthly payments. When refinancing to shorten your loan length, on the other hand, the ultimate goal is to pay off your debt sooner, which eventually could even improve your credit and save you money in the long run. You can find more tips on paying off your auto loan faster at RateGenius.
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