Pay Off Car Loan Fast
Short of buying a new home, buying a new car is one of the most exciting purchases you can make. But that frequently also means taking out a loan and is one of the largest financial obligations you can take on. On average, a car loan lasts for between 60 to 72 months, which means interest is accruing for 5 to 6 years unless you pay it off sooner!
There are useful strategies that can help you pay off your car loan early. Working with a financial adviser can help you decide what options make the most sense for your situation so you can pay your loan down and get out of debt sooner.
An outstanding car loan can seem like a cold that you just can’t shake no matter how many vitamins you take. But with a little bit of savvy saving and money maintenance guided by the experts at MyFuture, you could have your car loan paid off quicker and stop paying interest unnecessarily.
How To Pay Off A Car Loan Quickly
Car loans can be a great way to afford a vehicle that you don’t have the savings to pay for in cash. The car loan can originate from the car dealership or from a private bank and they vary in length, terms, interest rates, penalties, and amounts. The higher the loan amount or interest rate or the longer your term length, the more you’ll pay in interest on your car loan. It’s important to compare your options when taking out a car loan to make sure you are getting the best deal available to you.
In order to pay off your car loan, you’ll probably have payments on a monthly basis for the full length of your loan term which include interest that accrues on the outstanding balance. By paying off your car loan early, you can save money by reducing the balance subject to interest. It also means you can free up some money in your budget and start thinking about your next financial goal.
Before you go ahead and pay off your car loan early, check the conditions of your loan to confirm you don’t incur any prepayment penalty. Your lender stands to make less money in interest if you pay it off sooner and therefore may add in a penalty clause like this.
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The Fastest Way To Pay Off Car Loan
Why pay more than you need to when you can pay off your car loan early? Our experts have some useful tips to help you avoid the long haul of interest rates and get you out of debt much sooner:
- If you have the means, round your payments up to the nearest $50 or $100.
- Make a car payment every time you get paid. If you get paid every 2 weeks instead of monthly, you’ll pay off your loan even faster.
- If you receive a bonus or have some spare cash, try to make at least one large payment a year.
- See if you can refinance your loan to get lower repayments and a shorter term length.
- Adjust your budget and see where you can free up funds to increase your car payments.
Is It Bad To Pay Off A Car Loan Early?
Paying off a car loan early can have some unintended consequences. Make sure there are no penalties for paying off your loan early. If there are penalties, you need to weigh these against the cost of paying interest for the full length of your loan.
If you don’t have other high-interest debt to worry about and have the means to, then you should pay off your car loan as soon as possible. However, if that money could be better spent elsewhere or you have other highly pressing expenses, paying off your car loan early may not be the best option for you.
Ideally, you should pay off any debts with the highest interest rate first. At the very least, make the minimum payments on all of your debts to avoid any penalties. If you manage your money wisely and use tried and tested methods to pay down your debts, you’ll be able to rest easy knowing your finances are in good order.
Your credit score may drop slightly whenever you make a major change to your credit history, including paying off a car loan. Fortunately, this drop will only be temporary so long as there aren’t any other issues in your credit history, and it will likely rise again in a few months.
Get in touch with our experts at MyFuture who have vast experience in helping people manage their finances and pay down debts. Book your FREE no obligation Discovery Session today.
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Discovery Session
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During these steps, we do the research, run the numbers, document and present our recommendations to you. This can be a comprehensive financial plan focused on long-term wealth creation and/or a statement of advice focused on your more immediate financial needs. We will need to verify the information you provided during the Discovery Session by requesting supporting documents such as loan and savings account balances, payslips, etc. This ensures we are using highly accurate information when developing our recommendations.
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