Newsroom
How You Can Pay Off a Car Loan in Time?
- Oxcel Finance
- January 5, 2024
Whether you want to avoid paying any penalty for your car loan payments, stop paying more interest on the initial loan, or just want to get away from debt in general, paying off your car loan faster is the right course of action. Not only will it benefit you a significant amount of money in the long run, but it also offers you a sense of freedom.
Paying off loans early means you are paying a lower amount of interest which can add up to a few hundred to thousands of dollars.
That being said, paying off a car loan is easier said than done. Keeping that in mind, we have come to you with some strategies on how you can pay off a car loan in time. So let's check them out.
Top 5 Tips on How You Can Pay Off a Car Loan Faster
There is no hard and fast rule about paying off your loan faster. You can use any one of the strategies or mix and match some to take full advantage of them. Here are some of the most wonderful tips that will help you on your financial journey and you’re in-time loan-paying approach.
Think About Biweekly Payments
Even if it may not seem like a big deal, paying more than once a month can make a big impact on the speed of your payment.
Additionally, payment costs will be reduced. This happens because you will be able to regularly reduce your total debt resulting in interest having far less time to build up before your payment is made.
Without considerably increasing the sum you pay towards your debt each month; it aids in getting you closer to an early payback date.
Refinancing
The in-time debt repayment may be possible with refinancing if it's done right. If you select a reduced loan period, you might be able to maintain the very same minimum repayments with lower interest rates. You will automatically pay back your automobile loan quicker even if you don't make additional payments in this case.
But when it comes to refinancing, make sure that you are getting a lower interest rate than your previous car loan. Otherwise, the whole effort with refinancing will go in vain.
Make an Additional Big Payment at Least Once a Year
Making one change on your payment schedule and making one large payment once a year can get too closer to finishing your loan off.
In our everyday lives, we often get good surprises like a bonus, tax refunds, vouchers, and much more. When you get a bonus that is out of the norm, instead of spending it away, try to use it on your loan payment.
The more you pay for your car loan, the more it goes towards your capital debt instead of paying interest.
Rounding up payments of your car loan
Did you ever wonder why rounding up payments is still so popular to his day? It is because it still works.
If you round up your payments to a 50 this can make a big impact on your overall payment.
For instance, let us say you have a car loan for 13,000 AUD for a 6-year term with a 5% interest annually. In this specific case, your monthly payment will come to around 209 AUD.
If you can round it up to 250 AUD, you can protect over 1500 AUD on your interest. Moreover, you will be able to pay off your loan almost 13 months sooner than the planning life of the loan.
Pro Tip:
Check if your loan contract has any mention of a loan penalty. Loan penalties are payments that you must make if you pay off all your loans before the planned timeline.
In this case, make sure to have your loan penalty less than what you will protect if you plan way ahead of the date.
Final thoughts
Your car loan may have a sizable credit balance, but it probably won't have the most interest rate out of all your loans. This distinction typically belongs to credit cards, whose typical interest rate is roughly three times compared to that of car loans.
So, we always highly advise you to pay off your highest-interest loan first before you move on to the next one.
Other than that, simply follow the tips on how you can pay off a car loan in this article. Stay tuned for more updates.
