Best Practices for Paying off Your Car Loan

Best Practices for Paying off Your Car Loan

When you finance a car, the expense can cut into your budget each month and is often several hundred dollars. The debt of what you owe on the vehicle can take several years to pay off and can be a burden until you pay off the balance. If you want to start paying off your car loan quicker, there are a few practices to consider.

Refinance Your Current Loan

Consider refinancing your current loan to lower your interest rate, which can make it easier to pay off quicker. You can also obtain better terms, especially if you’ve recently increased your credit score. Try to shorten the loan as much as possible to ensure you can pay its offer sooner.

Make Biweekly Payments

A common trick to paying back a loan is to make a payment every two weeks instead of once a month. Paying twice each month allows you to make an extra payment every year to reduce how much you pay in interest. You can pay off the car up to six months sooner with this method without causing it to affect your budget.

Supplement Your Income

Earning more money is a great way of having the money to pay off your loan quicker. Consider working extra hours at your current job or finding a second job to work to supplement your income. Depending on your skills, you can consider tutoring students in the local area or even delivering pizzas. Determine how much extra you can put towards your car loan each month to determine how long you’ll need to work overtime.

Cut Out Unnecessary Expenses

Reducing extra expenses is another way of freeing up extra money in your budget to put towards your auto loan. You can cancel your cable television subscription, decrease the data plan on your phone, and even cancel a gym membership. Eat more rice and beans to spend less on your grocery bill and use coupons to save more at the store. You can also eat more at home instead of dining out, depending on how quickly you want to repay off your auto loan balance.

Make Use of Bonsues or Raises

Any time you get extra money throughout the year you can put it directly towards your car loan. Whether you get a bonus at the end of the year or are given a raise, put the extra funds towards your debt to ensure you can pay it off faster.

Round Up the Car Payment

Rounding up your car payment will allow you to slowly make progress paying off your balance. If your car payment is $268, consider putting $300 towards the loan. It will allow you to pay off your loan quicker without having to make additional payments. The extra $42 can add up throughout the year and shave off a few months off of your loan without making it feel like too much of a sacrifice.

Cancel Add-ons

There may be a few add-ons on your auto loan that are increasing what you’re paying. Remove extended warranties, service contracts, or GAP waivers to reduce your monthly payment and make it easier to pay more towards the balance. It will also help to reduce how much you pay in interest over the life of the loan.

Paying off your car loan can free up extra room in your budget for other expenses or to put towards savings. It can allow you to finally own your car outright and avoid the burden of having debt.

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