6 Easy Ways To Pay Off Your Car Loan Faster
Are you looking for ways to pay off your car loan faster? Here are 6 ways you can speed up the process!
Make sure your payments go towards your original loan
Unless otherwise stated, the majority of your additional payments are used to pay off interest costs rather than your original loan. But you can shorten the time it takes to pay off the loan by increasing your principal payments.
The reason it works is that it allows auto loans to calculate monthly payments using basic interest. Reduce the loan debt more quickly by paying down the principal first to shorten the loan’s repayment period. When paying, make sure the additional installments are designated as “principal-only.”
Auto refinance your loan
Auto refinancing is one way you can shorten your loan term and pay it off quickly. When you refinance your auto loan, you are taking on a new loan with better terms and conditions than your present loan. The new lender will pay off the existing loan sum, and you will have lower payments due to a lower APR, a shorter loan period, or both. Just make sure you get a shorter loan term.
Round up your payments
A good way to speed up paying off your loan is by rounding up your payments to $50. If your monthly payment is $128, you would round it up to $150. It’s a small increase that probably won’t significantly affect your finances, but it will make paying off your loans quicker.
Make bi-weekly payments
You can make an extra payment each year if you make biweekly payments. This is because certain months are a little bit longer than four weeks than others. Only 12 complete payments will be made in a year if you choose monthly installments. The bi-weekly alternatives, however, require you to make 26 half-payments or 13 full payments. This could enable you to make one more payment per year and pay off the debt sooner.
The Snowball vs the Avalanche method
You can prioritize paying off your debt using the debt snowball and avalanche methods, which will allow you to put more money toward your auto loan.
The goal of CVF Credit Union, as a full-service non-profit financial cooperative, is to support the Catholic community. Today, we are committed to using state-of-the-art technology, competitive rates, low fees, and individualized service to bring the credit union philosophy of “people helping people” to life in the 29 communities we serve throughout the lower peninsula of Michigan.
With the snowball method, you start with your lowest balance debt and work your way up until you’ve paid off your highest balance. In this situation, you would keep up with all of your debt payments and use any excess money to reduce your auto loan.
The debt avalanche method, which emphasizes paying off the loan with the highest interest rate first, is your other option. The goal is to pay off your highest interest-bearing loan balances first while steadily lowering your overall interest burden.
Remove any unnecessary extra items from your contract
Contracts for auto loans may include optional items that your dealer suggests you purchase to improve your experience owning a car. GAP, extended warranties, and car service contracts are examples of typical add-ons. Some lenders will grant refunds if the order is canceled before the deadline.
Each of these extra items has a distinct function, so consider your requirements while choosing which add-ons to forego.
The goal of CVF Credit Union, as a full-service non-profit financial cooperative, is to support the Catholic community. Today, we are committed to using state-of-the-art technology, competitive rates, low fees, and individualized service to bring the credit union philosophy of “people helping people” to life in the 29 communities we serve throughout the lower peninsula of Michigan.