There are many benefits to paying off a car loan quickly. You save money on the loan interest and improve your credit rating, to name just two. Although most financial institutions expect you to pay a monthly loan, there are methods that you can apply to your financial planning. This will allow you to pay off your car loan faster and save money. Find out the details of the loan, what steps you can take and how to save more money to pay off the loan faster.
Determine the current balance and penalties for the remaining payment
Determine the exact amount of the remaining loan payment on your car.
Obtaining the exact amount of money you owe to your car loan will allow you to make financial plans to repay the loan. If you have an online bank, you can find this information in your account or check the monthly account statement sent to you.
Get a copy of the bank or loan agreement.
You can sign it up at your financial institution personally or by signing up your personal account on the borrower’s website. Talk directly to a loan counselor or review the terms and conditions of your loan to determine if there are any penalties to pay the car loan quickly.
Some banks and financial institutions may charge you fees or penalties for paying the car loan rather than the original life expectancy of the loan, especially if you are interested in losing money.
Calculate the savings due to extra payments.
You can find online calculators remaining loan payments on websites like Bankrate.com or MortgageLoan.com, where you can find the interest rate of the loan, the monthly payment and the amount of the final payment. Then you can compare how much you can save by paying the loan in a lump sum, making payments twice a month or increasing the monthly payments.
If there are fines to pay your car loan ahead of time, compare the savings you calculated with the amount of the fines. Then you will know if you will save money by paying the loan ahead of time.
Go with your financial institution on recommendations for the remaining payment of a loan.
Your loan counselor can teach you the most beneficial way to pay off your car loan faster, especially when there is severe money. For example, ask the borrower if you can lower your loan balance if you can pay the remaining balance in a lump sum.
In some cases, borrowers can significantly reduce the rest of your car loan if you can repay it in a single payment.
Pay the principal
Determine whether you can make additional payments only to the balance of the principal.
Some borrowers may only charge you a fixed monthly interest rate, which may allow you to make additional payments from the principal. However, other borrowers may charge interest on any payment you make. Ask the borrower if you can make additional payments on the principal of the loan without paying interest. If so, you can make small additional loan payments each month and pay less interest over the life of the loan.
An example of the difference between the interest rates you pay is: If you owe $ 100 a month with $ 4 interest, that means you pay $ 104 a month. What you have to find out is that the $ 4 is a fixed amount per month, which means that no matter how much you can pay from the principal ($ 100, $ 200, $ 300), you still pay $ 4 monthly interest. However, if you pay interest on each payment, you will eventually pay 4% interest on any amount you pay. For example, $ 8 if you chose to pay $ 200 instead of $ 100.
Even if you have to pay interest, it is generally worthwhile to make additional payments from the principal to pay off the loan faster.
Make a separate payment for the principal.
Use a check or pay online to make an additional payment for the month that is separate from your regular loan payment. Write “for the principal only” on the check so that the borrower does not pay it for the next month.
If you pay online, pay the additional amount from the principal before paying the next month.
Make biweekly payments.
Instead of monthly payment, divide it by half and make payments every two weeks. It usually appears to be twice a month, but by the end of the year you paid twice a week (one full payment), as most months are longer than exactly 4 weeks. In other words, make 26 payments per year (every two weeks for 52 weeks) equal to 13 full payments. The total amount you owe will decrease faster and save your interest on the car loan.
Find extra income
Use the additional cash profits or gifts in the car loan.
Additional income, such as tax payments, work bonuses, or cash payments for birthdays or holidays can be used for your car loan, which will pay you faster. You will pay more interest on your car loan than you would in a savings or money market account.
Earn Additional Income
If you have time out of your normal work schedule, consider starting a secondary business to generate additional money to pay your car loan. Examples of secondary businesses are:
- Rent a room in your home. It can be for a student or someone who temporarily lives for a job in your city. You can advertise on Craigslist.com or the local classified ad page.
- Cut the grass or kick the snow.
- Seriously for elderly or busy professionals.
- Buy porcelain tableware, tools, jewelry, books, etc. At low prices on property sales and flea markets, sell them on eBay.
Offer party sales at home. Go to Tupperware products, kitchenware, wood baskets, jewelry, cosmetics, clothing and garden products. If you organize a sales team, you can also harvest a percentage of their profits.
Use the snowball technique.
For example, if you paid one of your credit cards, you pay the monthly amount to the loan. This way, you won’t be tempted to spend that money on other things.
Establish a budget and reduce additional expenses.
List your monthly income and expenses, including expenses that occur only once or twice a year. Then you can see if you have additional cash at the end of the month to pay off the loan on your car. If you don’t have additional cash, look at areas where you can reduce expenses.
Remove expenses you don’t need, such as cable TV channels or a landline phone. The money you spend on such costs can rather be used to pay off the loan on your car.
Look for lower rates on expenses and mandatory receipts, such as car insurance or the internet or cell phone bill by consulting all your service providers about promotional rates or packages. You can get online car insurance quotes to compare it to your current policy.
Reduce your spending on food by preparing food or food at home instead of eating at restaurants. In most cases, a specific meal will cost significantly more if you buy it at a restaurant than when you buy food or ingredients from a supermarket.
Prepare for the purchase of the next car
Ask about car loans in your bank.
Banks often have much better deals than car dealers, so look at the loans offered at your bank. Talk to a bank employee about how the loans work, how much they charge in interest and what kind, and if there are penalties for prepayments. If you choose to get a car loan from your bank, you need to take the bank and loan information to the dealer to get it.
Don’t get a car loan with advance payment penalties.
Now that you’ve learned how to pay for a faster car loan, you know how bad the early payment penalty is. There are many options for where to get a car loan, so next time, be sure to choose a financial institution that doesn’t require early payment criteria.
Continue the monthly payment of the car itself.
The quickest way to repay a loan is not to get one in the first place. If you paid $ 300 a month for the loan on your car and the loan has already been paid, continue to put this money into a savings or money market account. Then, if you are ready to buy your next car, you can pay a large installment or full amount of cash.
Continue budgeting and spending reduction.
If you start making and following a budget while reducing spending, keep these good habits. Put any money you save into a money market account to earn interest. Or, if you do not plan to buy a new car in the next 3 to 5 years, you can invest this money in a deposit certificate. Then you can pay a large payment of the initial fee or not get a loan for your next car.