Are you tired of having an auto loan hanging over your head? Are you looking for ways to pay off the car loan early and gain financial freedom? If so, you’re not alone!
Research shows that more than 107 million Americans have auto loan debt. Car loans allow you to buy the car of your dreams without suffering financial strain. However, the repayment period can stretch up to five or six years depending on the value of the vehicle.
Paying off the loan early can give you financial freedom and save you money in the long run. Once the loan is paid, you can sell the car and buy a new one without following complicated sales procedures.
With this in mind, keep reading for our top nine secrets and tips on how to pay off a car loan faster.
Shop for Better Auto Loan Rates
Has your credit rating improved since you took your auto loan? Consider shopping for a better auto loan and refinancing your existing one.
Refinancing can save you money in the long run and help you to repay the loan within a shorter period. All you need to do is check your credit history and shop around for better rates.
Applying for a new loan only takes a few minutes, and most lenders promise to make a decision immediately. You don’t have to wait for days to know whether your loan has been approved.
Make sure that you have an impressive credit score before shopping for better loan rates. If possible, pay off a few personal loans which could be tainting your credit history.
Refinance Loan with Pre-Computed Interest
If your lender uses a pre-computed interest to calculate the interest, paying off the car loan early will not make a difference. In this case, lenders use the original payment schedule to calculate the total amount due. You get fixed interest regardless of whether you repay the loan in a year or five years.
Check with your lender and confirm whether your interest is pre-computed. If this is the case, consider refinancing the loan. Find a lender who uses compounded interest or simple interest.
With simple interest, you can make principal-only payments. These payments are applied to the principal balance. As a result, you can save money on interest if you pay off the car loan early.
Negotiate for Lower Insurance Premiums
What if you could save some money from your car insurance payments? Couldn’t you channel that money towards repaying your auto loan? Negotiating for lower insurance premiums is a genius way of paying off your car loan faster without digging deeper into your pocket.
If your credit rating has improved, your insurer can offer you lower rates. All you need to do is ask. Also, table the necessary evidence to show that you are an ideal candidate for lower premiums.
Once you get a lower insurance rate, channel the savings towards repaying your auto loan. The few tens or twenties every month will make a difference in your repayment period.
Pay Off the Car Loan Early with Extra Payments
You don’t have to wait for the day your loan is due to pay the exact amount on your schedule. Try to make extra payments at least every two weeks. Channel any extra money that you come across during the month into your loan repayment.
You can also choose to make one extra payment every year in addition to the monthly repayments. This option is ideal if you find it hard to pay little amounts every one or two weeks. However, ensure that you are disciplined enough to save the money and only use it to clear the loan.
Pay Every Month
Most lenders will allow you to skip some payments if you are facing financial issues. Resist the urge to take this offer if you want to pay off the car loan early. Missing payments will only prolong the repayment period and set you up for high interest.
Try to repay your loan every month. If you are strapped for cash, take a payday loan for that month’s payment. You can get payday loans no credit checks within hours of making an application. All you need is a bank account and proof of your income.
Channel Extra Earnings into the Loan
We all get some extra earnings and savings every year. These come in the form of tax refunds, bonuses, pay rises, and extra income. Instead of using the money to splurge on secondary wants, channel it into your auto loan.
You can even decide to take a second job or work extra hours or shifts to make more money for your auto loan. Alternatively, forego your expensive vacation and opt for a cheaper option that will save you money.
The sacrifices may seem like they’re too much, but they are worth the peace of mind you’ll enjoy after repaying the loan.
Make One Large Payment
Making one large payment over the term can significantly reduce the repayment period. This payment can be anything from a quarter to three-quarters of the total amount owed. Make arrangements to pay off as much as you are able to.
To make this payment, you can consider selling something pricey that you have but no longer use. For example, you can sell the car you never use, your RV trailer, or unused appliances and furniture.
You can even de-clutter your home and organize a garage sale. Channel the proceeds of the sale into your loan repayment, and you will be able to repay the outstanding amount within a short period.
Ask for E-Statements
Your lender charges you for sending statements and other correspondences via mail. Most lenders give a small discount to clients who receive electronic documents.
You can slash a few dollars off your interest by requesting for electronic statements. Take advantage of online bill payment methods as well. Going paperless will not only save you money but also save space in your filing cabinet.
Sell to Buy
Are you eyeing another car type or model but haven’t yet repaid your loan? You can sell your current car, pay the loan, and use the balance to finance a second-hand car. However, this process requires patience and trust.
Most lenders will not allow you to sell a car before repaying the loan in full. Also, most buyers will be skeptical about buying a car that’s still on loan. You need to find a buyer who trusts you to clear the loan after receiving payment.
If you get such a buyer, sell the car and clear your loan. Top up the balance and use the money to buy your preferred car. If possible, purchase a used car to avoid plunging into auto debt again.
Don’t Be Stuck with an Auto Loan
Getting a car loan is great until you have to incur monthly deductions for five or six years. Don’t be stuck with this huge financial obligation over the next half a decade.
Follow these tips to pay off the car loan early and enjoy financial freedom and peace of mind. Also, check out our blog for tips and tricks on how to maintain your car and get valuable service from it.