5 Tips to Pay Off Your Car Loan Early
For many people, buying a car is usually an exciting moment. What is not enjoyable is making the monthly payment until you pay the loan in order the get the right to owning the car fully. A recent study revealed that about 7 out of 10 people including those who are quite wealthy borrow money to buy their cars. That means that there are a lot of leaders who are making good money by giving car loans. An outstanding car loan can affect both your financial situation and the value of your car by reducing the amount of your car’s equity and increasing your total debt. Below are tips to help you pay off your car loan early.
1. Don’t skip the payment.
The mistake that most people do is not paying the required monthly payment on time. If you want to pay your car loan on time, you need to ensure that you make a monthly payment on time. Most lenders usually giver their customers an opportunity to skip one or two payment a year without being listed as loan defaulter or charged a missed car payment fee. Although this helps to give the borrower a breathing space, what most borrowers don’t know it that the break actually gives the lender a chance to collect more interest from extra months created. You need to resist the temptation to skip payment even when you are given a chance to do so.
Another great option to ensure that you pay your car loan early is by rounding up your monthly payments. For instance, if you are required to pay $280 a month, you can round that figure and pay $300. Although the additional amount may seem small when sum up it can really make a big difference. A slight increase in your monthly car loan expense will not only save the money that you could have paid on interest but will also significantly reduce the payments period.
3. If possible make an extra payment.
Don’t hesitate to make an extra payment to repay your car loan if you get the chance. For instance salary increase because of promotion at work, tax refund, inheritance, lottery win or salary bonus will see you getting a lot of money at once. You need to take advantage of the situation to clear out your car loan.
4. Make biweekly payments.
Another great way of clearing your car loan fast is by making biweekly payments. Although this may seem like a wash, it is actually a great way to clear your car loan easily if the lender allows you to use this payment schedule. A steady biweekly car loan payment will ensure will cut down the repayment period as well as cut down the interest to be paid by half.
5. Refinance your loan.
This tip is only beneficial is done well. This is a good option especially if you want to improve your credit rating. Interest rates are usually calculated depending on your creditworthiness. This means that if you have a higher score, then your refinanced loan will have a lower interest. A low interest actually means that you can pay more monthly instalments thus paying off your car loan early.