For a lot of people, purchasing a new vehicle is a very fun and exciting experience. However, as most vehicle owners would agree, making the monthly payments can be a hassle. This is especially true if you’re stuck with a less than premium rate.
In most cases, a car loan can take as long as 6 years and as little as one year to pay off. Just keep in mind that you’ll pay a far greater amount of interest if you take longer to the loan back. With that being said, there are ways to quickly pay back your auto loan and we’ll discuss some of those methods below.
Pay More Each Month
Add a little more money to your monthly payment each month. One reason why this is a good idea is because those extra dollars can really add up quickly. For example, if you’re currently paying $200 a month on your auto loan then try paying $250 or $300. The more money you add to your monthly payments the quicker and easier it will be to pay off. On the same token, try to avoid bi weekly payment plans.
It is a much better idea to make your auto loan payment once per month than on a bi weekly basis. And the reason for this is simple: you’ll be making an extra payment for that year than if you were to pay on a monthly basis. For example, you would be making 26 bi weekly payments within a 365 day timespan if you were to choose a bi weekly payment plans. Making one monthly payment each month only results in 12 full payments each year.
Refinancing Your Auto Loan
Another great route to take when trying to efficiently pay off an auto loan is to refinance the loan all together. But do keep in mind that this is something that can benefit your financial situation only if you do it properly. More specifically, you need to make sure that your credit score is in a healthy region before making this move. You also need to crunch the numbers to ensure that you’re not going to be paying a larger amount of money over the long run.
For example, just because you’re monthly payments have decreased doesn’t mean that you are paying less over the long haul. Make sure that you check with your dealer to speak about the financial details associated with refinancing before you make this move. The reason why is because you’ll only succeed in lowering your monthly minimum payment amount. This doesn’t mean that you’ve financed a lower interest rate.
As you can see, there are a few steps that you can take to effectively and efficiently pay back an auto loan. One of the simplest ways to do it is to pay back as much as you can afford within a given month. If you can pay an extra one or two hundred dollars every month on your auto loan then you can dramatically cut down on the amount of time require to pay it back.