Top Tips on How to Pay Off Your Car Loan Quicker

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Each month, a large portion of people’s salary would go to bills including electricity, the internet, mortgages, and also loans. Usually, one of these loans that people pay for each month is a car or vehicle loan. 

According to research, the average monthly payment for brand new vehicles in the United States is 563 US dollars. For used vehicles, the average amount is 397 USD and for leasing vehicles, it’s 450 USD. When it comes to how much Americans owe when it comes to vehicle loans, it’s around 1.4 trillion USD.

How much you pay for a vehicle loan each month will depend on what car you are purchasing and how long your term will be. There are also other factors to consider like the interest rate given to you. However, no matter how much you will be paying, a car loan paid off early will generally do you good.

Why You Should Try to Pay Off Your Vehicle Loan Early?

Financial freedom is a great motivation to settle your car loan early. However, there are more benefits when doing this including being able to save money on interest. Many financial institutions nowadays would charge interest daily. The earlier you pay your vehicle loan off, the more money you’ll save on interest.

Another good reason to pay your car loan off early is that if you are aiming to get another vehicle, you’ll be able to start saving up for it early. With no vehicle loan to pay, you can start saving up for the down payment of your next vehicle purchase.

Doing this is also a wise thing to do for your vehicle insurance. When your can loan is paid off, you can contact your insurance provider and have your coverage reevaluated. When you already have the title of the vehicle, you should be able to opt-out of unnecessary coverages which would save you a lot from your insurance bill.

Tips You Can Follow to be Able to Pay Your Vehicle Off Early

While you can easily just ask for the payoff amount of your vehicle loan, it’s not that easy to pay it off, especially when you don’t have the budget just yet. It may take time to do this but as long as you don’t wait for 3 to 5 years to finish your loan off, then you should still be able to save money. Here are some great tips to follow to be able to pay your vehicle loan off early.

  • Never Skip Your Payments and Avoid Paying Late

There are times that lenders will allow you to skip or extend your payment or two once or twice a year. While this could help during certain times, it’s best to avoid seeking this option when it’s not necessary. An extension or skip a payment option will just prolong your loan and you’ll just end up paying more interest in the long run.

  • Check Your Option to Reduce the Loan Term

A vehicle loan would usually last from 24 to 78 months. Having a longer-term means lower monthly payment, but this will just cost you more money in the long run. You may check with the lender if there is a possibility of reducing your loan term. Usually, there are qualifications for this and you may want to ask them too about it.

  • Refinancing

Many would resort to refinancing if they are paying high-interest rates. Getting high-interest rates is caused by not-so-good credits, and many are stuck with this because it’s their way of building their credit back. If this is you, you can check with the lender if they could offer you refinancing. You also have to be qualified for this.

However, not all financial institutions would offer to refinance or have that option at all. If this is the case, you may start asking other financial institutions to refinance your current loan. Typically, you’ll be offered a contract with lower interest and/or monthly payments.

  • Try to Make Extra Payments

Sending extra payments is always a wise thing to do. Doing this can either reflect on your next monthly due. This means that your next payment due will be less than usual. However, if you want to make sure that it goes directly to your outstanding balance, you can ask the lender to do this. The more dent you make to your outstanding balance, the earlier you could pay your loan off.

  • Try Out a New Budget

Well, the tips above would work well if you have the budget. For example, you can only send extra payments if your monthly budget could accommodate it. However, if it doesn’t, you may want to check on spending less money or improving your budget. It could be about not buying unnecessary stuff in the meantime or carpooling with your workmates to save money on gas.

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