You may not know this but 7 out of 10 people finance their cars. With insurance rates going up as well as the months in the terms, you can now finance a car for up to 82 months. However, don’t let that lower payment fool you as you can end up paying way more than you bargained for in the end. A car payment can be a huge financial burden over a long period of time even though it’s a necessary one. Thankfully, we have six ways that can help you pay off your car loan early and put some of that money back in your wallet.
Pay half the monthly payment every two weeks
This painless option basically splits your monthly payment in half so you make two payments a month rather than one. When you do this you actually end up making 13 full payments per year rather than 12 which means you can pay off a 60 month car loan in 54 months and save on interest.
Another easy way to pay off your car loan quickly is to round up your payment. For example, let’s say your monthly payment is $315.00, if you were to pay $350 instead you will repay your loan in less time and save quite a bit on interest over the course of your loan. If you have the extra finances per month, always put it toward your car.
Make one large extra payment per year
If you can swing it, if you make one large extra payment per year, you can reduce the time of your loan as well as your monthly payment and interest. For example, on a $10,000 loan over 60 months if you make an extra payment of $500 per yea, you will repay the loan in only 49 months. Honestly, every bit extra counts.
Make one large payment over the term of the loan
Now let’s say you can’t afford to pay an extra large payment every year but can afford to make one large lump payment over the term of your loan. If you do so, you can reduce your loan term dramatically. For example, if you make a payment of $2,000 on a 60 month loan you will repay the loan in 46 months instead. Talk about a huge time save as well as a load of interest.
Never skip payments
Although this is not very common, some lenders allow you to skip payments once or twice a year. While this may seem like an enticing option, you should resist temptation. When you skip payments it only extends the term of your loan and will cost you more in interest.
Refinance your loan
While refinancing your loan may seem enticing, only do it if it lowers your monthly payment and reduces the length of your loan, otherwise refinancing does absolutely nothing for you. You are looking to improve your payment conditions, not make them worse. And while a smaller payment can prove to be enticing it’s not worth it if you have to extend the terms of your loan.