Tips to Repay Your Auto Loan Balance Quickly
Your car payment shouldn’t feel like a financial burden. Paying off your auto loan as fast as you can will save you money on interest and help you avoid any unnecessary risk of default. Here’s how to pay it off quickly.
Determine how Much You Owe and If There Are Any Prepayment Penalties
So, you want to pay off your car loan early — good for you. Now here’s how to go about it. First, make sure that there are no prepayment penalties on your loan. Some lenders make it difficult for borrowers like you to pay off car loans early because they’ll receive less money in interest. If there are no prepayment penalties, look for ways to increase your income so you can free up a decent amount of money to put toward your car loan every month.
Calculate how Much You’ll Save by Paying Your Loan Early
Figuring out how much you’ll save by paying off your loan early can be a bit tricky. However, you can start by working out your loan balance and its remaining term. If there are any prepayment penalties, factor those into your calculations. Use an auto loan calculator to check how much you’ll save if you repay your balance right now. It’s important to note that in addition to financial savings, you can achieve other benefits by paying off your loan early. For example, eliminating your loan could help boost your credit score and may free up money in your monthly budget.
Look for Ways to Repay Your Loan
If you find that your lender allows you to repay your loan without charging a hefty prepayment penalty, you can start paying down the balance. You can do this by either making an extra payment every year (use your tax refunds or bonus if you don’t have enough savings) or by rounding up your payments, so you are paying a little more every month (for instance, if you need to pay $900 each month, consider paying $1,000 instead). If you can’t repay your loan, but the interest rate charged by your lender is leaving a dent in your pocket, consider refinancing your loan.
