When you get a car loan, the last thing you probably want to do is pay it off quickly. But if you’re in a hurry and would instead save money for something else, there are ways to pay off your car loan quickly. Here’s how:
Paying more than the minimum required payment is a great way to pay off your car loan quicker. Experts recommend paying at least double the minimum each month and putting any extra money you have into an emergency fund that can help you if something unexpected happens, like a broken down car or job loss. If you do this, you’ll save interest and build equity faster on your vehicle.
As per Lantern by SoFi, “the average car loan interest rate by credit score can have a big impact on how much money you pay over the life of a loan.”
Put extra money toward your principal.
One of the easiest ways to pay off your car loan faster is by putting extra money toward your principal. Even if you can only afford to pay $50 extra per month, it will help you get out of debt sooner. However, if you can’t afford to put more than the minimum payment on your car loan now and then, don’t worry! Your next step is paying a few months in advance.
This strategy works best for people who make similar monthly payments or have enough money saved to cover their payments for several months at once. If this sounds like a good idea, be sure not to go too far into debt!
Refinance your car loan.
Refinancing your car loan is a great way to save money on the interest paid over time. The fee for refinancing will be about $500, and you pay a one-time fee to get a better rate. However, if you can lower your monthly payments by even $20 or so, this can add up over time.
Refinancing also provides other benefits, such as increasing your credit limit and adding more money toward the loan principal if needed, allowing you to pay off the car sooner!
Take advantage of grace periods.
A grace period is a time you have to pay your car loan without paying interest. For example, if a car has a five-year term and a grace period of four months, this means that if you make your payments on time for five years and then don’t pay anything during the last four months of your car loan’s term (or if it is paid off before that), there won’t be any late fees or interest charges added.
The key here is not to miss any payments because missing even one payment can mean accruing thousands in additional interest over time.
There are many ways to pay off a car loan more quickly. You just need to think outside the box and explore all of your options before making any decisions. So seek advice if you need it before jumping to a conclusion.