Now, let’s talk about how you can actually pay off your car loan. Here are some strategies that are sure to quickly cut down your car payment. If your current auto loan came with high interest rates and other monthly fees,refinancingyour loan could potentially give you better terms and a lower payment. You should be able to qualify for better loan terms as long as your credit score has increased since you applied for the loan. This is quite likely if you’ve been making your monthly payments in full and on time. If you’re unable to qualify for a lower monthly payment or a sooner payoff date, financing might not be your best option. Your goal is to pay off the loan quickly, so you don’t want to lower your monthly payment and lengthen your term because in the long run, you’ll pay the same amount with increased interest.Refinance
Don’t Skip Payments
Auto loan payments can be costly, so I understand why it can be tempting to skip a payment or two if your lender gives you permission. But know that skipping payments will take you further away from your goal of an early payoff by lengthening the term of your loan and making you pay more in interest.
Make Biweekly Payments
If you’ve been meeting all your monthly payments without any trouble, consider taking it up a level and start making bi-weekly payments toward your loan. Instead of making a monthly payment, take what’s left of your car payment and divide it in half. This is what you will pay every two weeks. Now, your loan balance will continue to decrease and you will pay less interest on the remainder of the loan.
Make Payments On Your Extra Pay Periods
If you want to make additional payments but feel like you can’t commit to a biweekly payment, think about making additional payments on your extra pay periods. You might already use your extra paychecks to buy new clothes or treat yourself to a spa day, but consider giving them a new use and pay off your car loan debt. You will be able to make plenty of “fun” purchases without worry once your loan is paid off!
Round Your Payments Up
Another way to pay your loan off faster is by rounding your payments up. Instead of paying your monthly sum, consider rounding your payment up to the nearest $50. This strategy could potentially save you hundreds of dollars in interest.
Make One Large Payment Per Year
If you like the idea of rounding your payments up to the nearest $50, you might also like this strategy. With making one large payment per year, you are essentially rounding up one month’s payment. It doesn’t matter what time of the year or payment you choose, but consider adding an extra sum on top of what you already pay. For example, commit to paying an extra $500 per year. This is another great way to save big on interest.
Cancel Add-Ons
Sometimes car buyers can agree to include add-ons in their auto loans without realizing how much extra they cost. Common types of add-ons are GAP waivers, service contracts and warranties. If your car has been driving smoothly and doesn’t need these extra forms of protection, canceling them could decrease your loan payment.
Reduce Expenses
If you like the idea of lowering bills you already have, think about what extra expenses you could temporarily cut out from your life. Maybe you could ditch cable or your landline or another monthly payment. You could also cut down your dining out, entertainment or shopping budgets to free up some extra cash to pay your loan off.
Snowball Your Debt Payments
Snowballing your debt can not only help your car loan payments, but other forms ofdebtyou might have. First, take your lowest amount of debt or your highest-interest debt and gather up enough funds to pay it off. Next, take the amount of money you paid toward that debt and apply it to your next debt payment until it is paid off. Finally, take the full amount you paid and apply that to your next debt payment. Follow this pattern until your debt is gone.
Use Tax Refunds, Bonuses, Or Raises To Make Payments
Another easy way to pay off your car loan faster is by using your tax refunds, bonuses and pay raises to make extra payments. While you might not want to spend this extra money on your car loan, it will certainly benefit you in the long run when your auto loan is all paid off.
Earn Additional Income
If you’re struggling to find extra cash, you might consider other ways to earn additional income. Perhaps you can use a talent or hobby to make money, rent out a room in your house, or sell items online. No matter what side hustle you choose, you’ll be one step closer to an early auto loan payoff.
