Next to your rent or mortgage payment, having an auto loan is one of the largest debts you’ll have. If you have an auto loan, it is possible to pay it off faster than what is on your contract. Below are 5 tips on how to pay your auto loan off faster.
Round Your Payments Up
If you have a few extra bucks, a key to paying auto loans off early is to round your payments up. You may barely miss this money, but you’ll see the savings in the long term.
Let’s look at how this can add up.
By applying an additional $20 a month to your payment, you’d have made an extra $240 payment in one year to reduce your loan, saving a bit of interest. This also saves you time with paying this loan back.
Get a Side Hustle
Some say that more money equals more problems, however, in the case of trying to pay off car loans fast, additional money is a great resource. Pick up a side hustle to bring in more money. A few side hustles include:
- Selling on eBay
- Graphic design
- Dog walking
Whatever money you get minus the expenses you need to replace, put it all towards your loan repayment. Even applying just $50 a month can help reduce the interest due on your loan. A car loan calculator can help you see how much you’ll save.
Refinance Your Auto Loan to a Lower Rate
If you have decent credit, consider an auto loan refinance for a lower rate. Now what could get you in trouble is locking in a lower interest rate but for a longer term. Be careful before you sign on the dotted line. The point is to lower the interest you’re paying over the life of the loan.
Do Not Miss a Payment or Be Late
At times, particularly during the holiday, banks and credit unions offer those with new and used car loans skip-a-payment options. This helps families put more money towards travel and purchasing gifts. Skipping the payment does not make it go away though. It’s moving the payment out another month and that is carrying more interest charges for you as well. The same holds true with late payments. Try not to do it, as it’ll carry not only a late fee but an additional interest charge on top of that fee.
Improve Your Credit Score
Auto loan rates do tend to get lower with better credit, so you may need to focus for a few months up to a year on improving your credit score. Even boosting just a few points can get you better car loan rates. A few things you can do before shopping for refinanced car loan rates include:
- calling creditors to remove late payments
- reducing your credit card utilization
- making on-time payments
Final Thoughts on Auto Loans
Now before implementing any of the tips above, be sure to check with your current lender if there are any early payoff penalty fees.
What is your best tip for painlessly paying off your auto loan faster?