How to Pay Off Your Car Loan Early
Car loans are one of the most common types of debts in the modern world as these days, almost everyone has a car. However, that doesn’t mean that they are a positive thing.
Of course, most of us have car loans because we couldn’t afford to pay the full price for the car there and then, which is no surprise as cars are extremely expensive. Now, you might find that the car loan is dragging you down so here are a few things you can do to ensure that you pay it off early.
Make Payments Every Two Weeks
Usually, you will be required to make a car loan payment every month but this is actually just the minimum you can pay. If you wanted, you could make a payment every month, every week or even every day. So, one of the easiest ways that you might be able to pay off your car loan a lot quicker is to actually make payments every two weeks rather than every month.
Often, in order to be able to do this, you will have to secure a deal with your lender but it is usually quite easy to do. By making a payment every two weeks rather than every month, you will actually be able to pay off your car loan twice as fast, meaning that you will face less interest and will have more to spend yourself in the long run.
Round Your Car Loan Payments Up
This is a really neat little trick for paying off your car loan early and it is one that will usually not make much of a difference financially to a lot of people.
Let’s say that you purchased a car for $15,000 and you are paying 4 percent interest every month for 5 years (60 months); this would mean that your monthly payment schedule would be $260. One of the things you could do is to round this payment up to the nearest hundred; so in this example, it would be $300 per month. This means that over the course of a year, you will have paid $480 extra off the cost of your loan which will once again mean less interest and a shorter loan period. In fact, in our example you will knock a huge 8 months off the time it takes you to repay your loan.
Make One Extra Payment Per Year
Now, we know that all of the ideas above are nice ideas, but for a lot of people, it might not be possible to make bi-weekly payments or round their payments up. If this is the case, you can still reduce your car loan period slightly by making just one extra payment per year. All you need to do is save up an extra monthly payment per year and you will be able to make the extra payment.
There are a few ways you could do this. You could take money from your savings or work bonus. If you can’t do this, you could take your usual monthly payment amount and divide it by 12, then each month, save this amount and by the end of the year, you will have another full monthly payment.