Key Takeaways

In this post, we show you some of the ways you can pay off your car loan faster. Here are 7 tips we’re discussing in this post:

• Use all unexpected income to pay your auto loan
• Refinance your loan to get better terms
• Set up automatic payments
• Don’t increase the length of the loan
• Make biweekly payments
• Round up your payments to a higher figure
• Never skip payments

Car ownership is a huge milestone in life that many of us strive for, but it can also be a big financial commitment. Taking out an auto loan to finance your vehicle means making consistent repayments until the debt is settled. This requires discipline and good money management skills. Fortunately, there are several strategies you can use to pay off your car loan faster. Here are 7 tips:

1. Use Windfall Money For Autoloan Payments:

If by chance you come into some extra cash, such as a bonus, tax return, a birthday or annivesary gifts then use it to make a lump sum payment towards your auto loan. Regardless of the amount, this amount can be an opportunity to put a dent in your loan balance. Using unexpected income every time you get it will reduce the amount of interest you’ll have to pay out over the course of the loan period and shorten the duration significantly.

2. Refinance Your Loan

Just because you took a loan out at a certain interest rate and payment doesn’t mean that you have to destroy your financial future by making those same payments with the same lender. If you have good credit and/or your loan is almost finished, it may be worth refinancing for a lower interest rate and shorter term. This means approaching a different lender, or going back to your current lender and asking for a better rate. Doing can save you big money on interest charges over the life of the loan, as well as reducing the number of months that you’ll have to make payments.

3. Set Up Automatic Payments:

Setting up automatic payments ensures that you’ll never miss a payment, which will help you to avoid any late fees. Plus, if your lender offers a small discount on interest rates for setting up automatic payments, you can save yourself even more money in the long run. The money for the payment will automatically come out of your bank account on a regular basis, so you won’t need to worry about remembering to make the payment each month.

4. Don’t Increase the Length of the Loan:

Although it may seem like a good idea to extend the length of your loan in order to lower your monthly payments, this will actually end up costing you more money in the long run. Lenders may charge an additional fee for extending the length of your loan, and you will pay more in interest over time.

5. Make Biweekly Payments:

Making biweekly payments instead of monthly payments can help speed up the process of paying off your loan. You will essentially be making one extra payment each year and that could cut off months from the life of your loan, depending on how much you owe and what interest rate you have. During auto loan applications, you’ll typically agree to a monthly payment schedule. Even though biweekly payments may not be an option, you can always ask your lender to set up a separate payment arrangement.

6. Round Up Your Payments:

Rounding up your payments is an easy way to chip away at the amount you owe. For example, if your monthly car loan payment is $350, consider paying $400 instead. By the end of the eighth month, you’ll have made an additional payment. You won’t be paying double every month and it’s a great way to quickly reduce the balance of your loan.

7. Don’t Skip Any Payments:

Finally, the most important tip to pay off your car loan faster is to never miss or skip any payments. Missing a payment can cause your rate to increase, add late fees and even damage your credit score. Additionally, missing more than one payment in a row can result in repossession of your vehicle. If you know that you won’t be able to make a payment, contact your lender to discuss your options.

Why Pay Off Your Auto Loan Early?

The biggest benefit of paying off your car loan faster is that you save more money in the long run. This way you free up cash for savings or other investments you may have. The lesser your financial responsibility the lesser stress you may have.

Also, with the records of faster payment, you can show lenders that you are a reliable borrower and can get better terms or lower interest rates in the future.

Is Paying Off Your Auto Loan Early Worth It?

When it comes to deciding whether it’s worth it to pay off your car loan faster, the answer largely depends on your own financial situation. Unfortunately, paying off your car loan early lowers your credit score, which eliminates some of the positive benefits of paying off your loan early. That’s because any major changes to your credit history are considered to be negative in the eyes of the credit bureaus.

Work With Eastern Shore Hyundai to Buy Your Dream Car

Eastern Shore Hyundai is here to help you buy the car of your dreams. We offer financing options for all types of buyers, so if you’re looking to purchase a new or used vehicle, we can help make it happen. Our experienced staff will walk you through the process and answer any questions you may have about purchasing a vehicle from us. We’re dedicated to making sure our customers get the best service possible and that they drive away in a car they love. Contact us today to learn more.