Being in debt, even with a small debt like a car loan can be challenging. If you want to get out of debt as soon as possible there are certain steps you can take to pay off your car loan faster and start saving instead of paying interest.
Research, research, research
If you’ve recently bought a new car or you’re in the market for a car now and just want to know what you’ll be getting into, the best way to get out of debt fast is to do your research. Before you finance your new car, compare policies. If you’ve already got finance for your vehicle but just want to know how to pay it off as soon as possible, dig out your policy and really get to know it.
Make more payments, more often
One of the easiest ways to get out of debt faster is to make more payments, more often. This doesn’t necessarily mean paying more off your loan. If you have a budget and need to stick with it, simply break payments down so that you’re paying the same amount of money into your loan, but more often. Instead of making monthly payments, make fortnightly payments. This will mean less interest will accumulate as payments are coming in more frequently. However, always do your research first, that’s why it’s step one of the plan. Research whether or not you may be penalized for making extra payments or paying off the loan balance too early.
Pay a little extra
Paying a little bit extra can go a really long way when it comes to paying off your car loan faster. While you may not have much extra to spend, it is worth considering whether you can up your fortnightly or monthly payments. Try rounding up to the nearest hundred. For example if you normally pay $275, choosing to round it up to $300 instead can shave months off your loan. Instead, you could consider whether you have enough budget left over to increase your payments by a specific amount each month. For example paying an extra $20 or $30 per payment will save you a lot of interest over the course of your loan.
Pay a lot extra
Of course if you could do this, you wouldn’t have needed to get a loan in the first place, but if you come into any extra money it’s a great idea to put it straight on top of any outstanding loans like your car loan. If you got a good tax return, consider putting it all on your loan. By making at least one, larger additional payment each year you’ll save a lot in interest. Remember, the sooner you make the payment, the sooner you can pay off your car loan.
Refinance
If you’ve already taken out your loan you may want to think about refinancing. Take a look at your current interest rate and compare it to others. While you may not want to go to the effort of refinancing, it’s always worthwhile and can save you a lot of money and hassle in the long run. Obviously, you’ll only want to refinance if this gets you a better deal, however going in with information on similar deals will help your case. Make sure you don’t lower your monthly payment just to have a longer term loan, this will only increase the amount of interest you’re paying.