How to Pay Off Your Auto Loans Faster
Lenders have made car loans easier for borrowers to obtain. However, the loan terms can be extremely lengthy, sometimes as long as 96 months. A loan this long can accrue an immense amount of interest over time, so we want to help take some of this burden off your plate. By following these tips, you can pay off your auto loans faster and get rid of that payment every month, so keep reading!
6 Tips to Pay Off Your Auto Loans Faster
Below are 6 tips that True Sky Credit Union has compiled to help you.
Tip 1: Determine If Paying Off Your Loan Early Is Right For You
First, analyze the details of your loan to make sure you know exactly how much you owe and if your lender allows an early payoff. If your lender does, you should ask if there’s a prepayment penalty because it could likely diminish the savings on the interest you would gain by paying off your loan faster. Next, make sure that all extra payments go toward the principal on the loan rather than a credit toward your next payment, interest, or other fees. Be sure to specify to your lender that the extra money is a principal-only payment. After going through all the details, use an auto loan calculator to see how much you can save by paying off your loan early. If you receive prepayment penalties, your savings should outweigh these.
Tip 2: Biweekly Payments
Rather than paying once a month, changing the frequency of your payments to every two weeks can rack up an extra payment on your loan every year. For example, if you have a payment of $600 each month and there are twelve months in a year, you’ll pay $7,200 each year. But if you split up this payment and pay $300 every two weeks, you’ll make 26 payments a year which comes out to $7,800. That’s a whole extra payment that you didn’t even notice you made!
Tip 3: Rounding Up Your Loan Payments
Another way to speed up your payment schedule is by rounding up your payment to the nearest $50. This only slightly increases your monthly payment, but it can help save you money in interest and pay off your loan sooner in the long run.
Tip 4: Refinance Your Current Loan
When you purchased your car, it may have come with a high interest rate or other unwanted monthly fees, so you might want to consider refinancing your loan. By refinancing, you can potentially receive better terms and a lower payment, especially if your credit has improved since your car purchase. However, it is important to look for a lower interest rate and a shorter-term loan so you will only be stuck paying what you have to at a high rate of interest.
Tip 5: Reassess Your Add-Ons
Add-ons in your original loan contract can severely slow down your loan repayment. Therefore, it’s crucial to look at your paperwork and identify the fees for any extra items you’ve been paying. For example, you may be paying for extended warranties or service contracts. Although you may want to keep some add-ons in your contract, many of them can likely be removed.
Tip 6: Change The Way You Utilize Your Money
One of the best ways to pay off your debt faster is to put your extra money toward it. For instance, you can take your tax refunds, pay raises, or bonuses and use them on your auto loan. Of course, this isn’t the most enjoyable way to spend your money, but having a little sense of delayed gratification can help you pay off your loan faster, free up your budget sooner, and give you more time to spend on all the things that bring you joy!
If you can’t seem to find any extra cash in your pocket, try to find ways to tighten up your budget and reduce your current expenses. You probably have some monthly items you can get rid of to rack up some extra change. Having too many subscriptions, buying too many unnecessary clothing items, or spending too much on entertainment can become pricey very quickly so it’s important to be mindful of these expenses and avoid overspending. Ask yourself what expenses you want to cut from your budget and use that money to pay off your auto loan faster.
Pay Off Auto Loans Faster With True Sky Credit Union
True Sky Credit Union is here to help you on your journey to paying off your auto loan faster at True Sky Credit Union. We can help you find the best rate and reduce your auto loan payment through refinancing or give you a great rate on your next car purchase. Get started by doing a loan request, or visit one of our locations in Oklahoma today!
