The average price for a new car is currently $ 36,744, according to the National Automobile Dealers Association. Most Americans cannot afford to pay this out of pocket, which makes taking out a car loan a necessity.
Auto loans are one of the most common types of consumer loans, and they are a little different from other types of loans. Since the loan is secured by the vehicle, auto financing tends to be easier to obtain even if you have bad credit, although loan rates can be higher, creating a higher monthly car payment. .
And most dealerships offer a convenient, easy-to-access auto financing option. But a car is a depreciating asset, which means it loses value over time.
Ultimately, you could find yourself in a position where you owe auto lenders more than you are worth. So it makes sense to try to pay off a car loan as quickly as possible. Below are five ways to get started.
To start exploring your options for lowering your monthly payments, car owners can visit Credible for the best personal loan rates.
1. Consider refinancing your loan
If your credit score has improved significantly since you took out the original loan, you might want to see if auto refinancing is a good option for you. With a refinance loan, you replace your current car loan with a new loan at a new low rate.
But if you choose auto refinance, you want to keep the same loan term. If you extend the term of your loan, your loan interest rate and loan payment may be lower, but you will not pay off the loan any faster. You can use an online auto loan calculator to see how much you could save with an auto refinance loan.
If refinancing your auto loan doesn’t make sense for you financially, you may want to consider taking out a personal loan instead. If you want to explore your personal loan options, you can visit Credible to find your loan interest rate and compare lenders.
CAN I USE A PERSONAL LOAN TO PURCHASE A USED CAR?
2. Make two small monthly payments
Right now, you’re probably making a monthly car loan payment. To speed up the repayment process, try making two small payments every two weeks. If you continue this way, you will end up paying an additional car payment per year.
When you do this, you will pay less interest over the life of the loan. And those extra monthly payments will help you pay off your car sooner, but not by much.
THE SECRET ADVANTAGE OF PAYING YOUR MORTGAGE EVERY TWO WEEKS
3. Take advantage of any additional income
Another way to pay off your car loan faster is to take advantage of the extra money you receive throughout the year. If you get a big tax refund, birthday cash, or a work premium check, why not put that money into your car loan?
Putting “fun” money into your car loan may seem difficult at first, but once the loan is paid off, you will have more flexibility in your budget for additional expenses. And you’ll end up saving more money in interest over time.
4. Pay a little more each month
Another way to pay off your auto loan faster is to pay a little more each month. For example, if your monthly car payment is $ 200, try paying $ 300 for the loan each month. This extra money adds up quickly, and you could save yourself years by paying off that loan.
If it’s not possible to pay so many additional fees given your current financial situation, you can try rounding up your car payments instead. For example, a car payment of $ 275 becomes $ 300. This type of change is small enough that it seems feasible to most people, but it can make a big difference over time.
WHAT IF I PAY MY EARLY CAR LOAN?
5. Consider a low cost personal loan
And finally, you might want to consider paying off your auto payment with a low cost personal loan.
Unlike auto loans, personal loans are unsecured, which means you don’t have to secure the loan with collateral. Because of this, your income, credit history, and credit score will become a much higher priority for a personal loan, and improving your credit could help you get a lower rate.
If you want to explore this option, you can visit Credible and get in touch with an experienced loan officer. They can answer your questions and help you determine if it’s the right decision for you.
The basics about paying off your car loan
Paying off your car can help you save money and reach your financial goals faster. Even by making small additional payments on your car loan, you can pay off the loan faster and save money on interest.
For some people, taking out a low cost personal loan may be the best option available. If you want to explore your personal loan options, you can visit Credible to compare rates and lenders.
Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.