4 Tips to Help You Pay Off Your Loan Faster
Trying to pay off your car loan? Looking for ways to pay it off faster? Then, take a look at these tips. They can help you eliminate this debt faster.
1. Make Payments Every Two Weeks
If you get paid every fortnight, you may want to pay your car on that schedule. Instead of paying the loan every month, pay half of the loan every time you get paid. That sounds like the same amount, and in most cases, it will feel the same to your budget.
However, it actually results in an extra payment every year. To illustrate, imagine you pay $300 every month. That's $3600 per year. In contrast, if you pay $150 every two weeks, that ends up being $3900 per year based on 52 weeks in a year. Those extra payments add up and help you pay off the vehicle faster.
2. Put Any Windfalls Toward Your Loan
When you get a bonus from work, cash gifts from family members or any other windfalls, consider putting them toward your car loan. The more you pay off the principal right away, the less interest accrues, and the faster you pay off the balance. Even if you just put half of any extra money you receive toward the car loan, that can help.
You may also want to consider rounding up the amount you pay every month. For instance, if your payment is $285, consider paying $300 every month.
3. Refinance for a Lower Rate
Your interest rate directly impacts how long it takes you to pay off your car. If your car loan has a high interest rate, see if you can refinance with a loan that has a more favourable rate. Contact your bank to see about your options.
To put numbers on that, imagine you have a $10,000 car loan with a 7 percent interest rate. if you still have 36 months left on the loan, your monthly payments will be $308.77. In contrast, if you lower the interest rate to 4 percent, your monthly payments fall to $295.24. If you continue to chip in that extra $13 per month, you will pay off the loan faster.
4. Make Sure to Make Payments on Time
Whether you refinance your car loan or not, it helps if you make the payments on time. Most lenders charge late payment fees, and those fees can distract you from paying off the loan in a timely fashion.
For more information, contact companies like Clubmoney.