Five tips to help pay off your car loan faster
You may have heard the saying “It’s not how much you make, it’s how much you save,” but as true as this might be, it is often challenging to save a good portion of your paycheck when you are making high monthly payments on multiple loans. In America, one of the most commonly found forms of debt after mortgage loans are auto loans.
Did you know that currently, 107 million Americans have some amount of auto loan debt? According to Credit Karma, “As of the second quarter of 2017, auto loan debt continued a six-year increase and rose by $23 billion, amounting to $1.19 trillion. According to recent data compiled by Experian, the average new vehicle loan was $30,534.
In addition to high loan national averages, depending on your credit history and score, the interest rate on your car loan could be high, making it harder for you to feel like you’re getting closer to paying it off as the total only seems to go up every month.
To help you pay off your auto loan faster, we’ve gathered a few tips from huffpost.com that will have you closer to financial freedom in no time:
- Make Bi-Weekly Payments: A good idea to kick off your auto loan payment plan is to reach out to your lender and find out if bi-weekly payments are an option. By submitting half your monthly payment every two weeks less interest will accumulate as your payments will be applied more often.
- Round Up the Payments: When paying any sort of loan off, making slightly higher payments can make a big difference in the long term. For example, if you’re making monthly payments of $235, you might want to consider paying $250 instead. Even though it’s only $15 extra every month, after one year you will be $180 closer to your final goal.
- Refinance Your Loan: If you’ve been keeping up with our blogs, you know that debt consolidation and refinancing are usually good practices when trying to improve your financial situation. This works when lenders let you renegotiate your terms of payment after six to 12 months of steady, on-time payments. Many times this helps the lendee decrease their interest rate and allows them to pay their loan quicker.
- Use Your Tax Refund or Additional Income: Using money from your tax refund or any additional income you might earn throughout the year will speed up the process and help you pay less in interests. As tempting as a shopping spree might be, remember that one extra payment will save you money by decreasing the overall term of the loan, so is that new outfit really worth it?
- Go Paperless: It is not uncommon to see companies help you save money by encouraging you to go paperless and take advantage of electronic payments. This helps both parties save money and helps you ensure that there are no late payments as they will easily be taken out of your account every month. On top of everything, you’ll be helping the environment by wasting less paper … it’s a win-win!
Remember that, as Nerdwallet explains, the new rate you’ll qualify for will depend on multiple factors, such as your credit history and score. If your credit score has improved or you’re having trouble making your car payments, this is definitely something worth exploring! To learn more about other ways in which you can pay off your auto loan, click here!
Why you should pay your loan early
When paying off your car loan—or any loan for that matter—not only are you closer to financial freedom, less stress, and a larger savings account, but this could also dramatically improve your credit score as you’ll have lower debt and a better payment history! Even though this credit score increase doesn’t happen overnight, it should definitely be an incentive to tighten your belt and pay off that loan as quickly as possible.
LendingPoint is a personal loan provider specializing in NearPrime consumers. Typically, NearPrime consumers are people with credit scores in the 600s. If this is you, we’d love to talk to you about how we might be able to help you meet your financial goals. We offer loans from $2,000 to $25,000 with terms from 24 to 48 months, all with fixed payments and simple interest.