Nowadays, almost every American carries some sort of debt. And one of the most common causes of debt is taking out a car loan. It is time for you to find a way to pay that car loan as quickly as you can. To help you with that, we will give you some ideas on how to pay off your car loan faster.
How to pay off a car loan fast?
Before we begin, make sure that there are no penalties for an early loan payoff on your car loan contract, otherwise, paying off your loan faster will not benefit you much or at all. You need to be certain that early payoff is allowed by your car loan contract. Early payoff is allowed in most car loans but there is no harm in double checking, better safe than sorry, right? Early payoff penalties can be dangerous, especially if you have a credit score that is far from good or if your car loan has an interest rate that is high. Now let’s take a look at how you can get rid of your car loan fast:
Lower the interest rate on your loan by refinancing
Has the state of your credit score gotten better since you bought your car? There is a real possibility for improvement in your credit score if you have paid all your bills for the last year on time. If you refinance your loan to a lower interest rate, it can be a really efficient way to pay off your car loan sooner.
Make a payment every two weeks instead of once each month
Now, for this one to work, you need to divide your monthly payment in half, meaning that you will be making a car loan payment every two weeks instead of one payment at the end of every month. You may have never heard of this trick before, but it is actually a very cool one. By making a payment every two weeks, you will be paying half of your payment 26 times instead of a standard 12 payments for a year. That means that you will be making a single, whole extra payment every year. Using this repayment method has more than one benefit, as by making payments every two weeks, you will pay less interest over the whole period of the loan. When you are making a payment every two weeks, your balance is going to decrease continually, making the amount of interest that you are paying lesser, compared to what you would pay with a single payment each month.
Use Your Extra Pay Periods
Much like with the two-week repayment plan, you should pay extra on your car loan extra pay period. You have probably never thought about doing this till now, but if you get your salary on a weekly basis, that means that every month you are getting 4 paychecks. That means that there are four months in a year, where you are getting 5 paychecks instead of 4. While it is always nice to spend that extra money on stuff you like, imagine how beneficial to your car loan repayment that money can be. When you are repaying a debt, you must stay focused and determined towards reaching your goal to be debt free. That means that if there is a possibility to make your car loan pay off faster by using your extra paychecks towards repaying that loan, you should not think twice about it. Yes, it will be more fun to spend the money on other stuff, but keep in mind that the sooner you are free from your debt, the sooner you will be able to enjoy your life just the way you want to.
Snowball debt payments
This is a method that can be applied to all kinds of debt, including car loan repayment. With this method, you need to take your lowest debt amount and channel all your funds in repaying that loan first, make it an absolute priority over every other loan you have. After you finish repaying this debt, do the same thing again, and start putting all your money towards the next lowest debt you have.
Keep doing the same thing over and over again until there are no more debts left. This method of repaying debt can be really helpful as it not only makes your overall debt repayment process easier, it gives you focus and single targets, making it easier for you to see progress in your debt repayment instead of feeling like you are getting nowhere. There are other ways to use this method. Instead of starting with the debt with lowest amount, you can start with the one that has the higher interest rate. That way, once you are done with the first debt, every debt that follows will get easier and easier to repay.
Which way you choose is up to you and your specific financial situation. Whatever your choice is, this method is sure going to help you deal with your debt. As many people nowadays know, debt can be quite addicting. Getting immediate cash flow always feels great, but once this becomes a habit, the problems start piling up. That means that in order to get rid of your debt, you must take out any loans in the process. With every loan you take out, repaying your overall debt becomes harder and harder.