Getting a car loan is a significant financial decision you’ll need to make. If you choose poorly, your loan can leave you struggling with your other bills and your savings obligations may be temporarily restricted due to the need to pay off the loan. This situation can cause you many headaches, especially if your car loan is just one of many things that are holding you back from gaining financial freedom. Whatever the case may be, learning how to pay off car loan faster is undoubtedly one of the wisest decisions you can make.
If you are looking to learn how to pay off your car faster and be financially free, there are a few strategies that will yield remarkable results. Take the time to read this article, because it will show you the fastest ways to pay off a car loan.
Why You Should Pay Off Your Car Loan Fast
In most cases, paying off your car loan faster will help you save money on interest. Also, it can be useful in reducing the overall term attached to the car loan; hence, offering you more money and time to get more money to deal with home improvement, save for your retirement or even pay off other loans you have.
Nevertheless, before dedicating your time and efforts to understanding how to pay off car loan faster, you should know the terms of your car loan. Notably, the terms of a few loans include penalties for early payoff. Therefore, it will be counterproductive to pay off such loans quickly. However, this only happens on rare occasions as most loans do not impose any fines for early payoff.
Strategies for Paying Off Your Car Loan Fast
If you know that that paying off your car loan faster will not add any penalties, you should do the following:
1. Make bi-weekly payments on your car loan
One of the fastest ways to pay off a car loan is paying every two weeks. All you have to do is to divide the monthly payment by two and pay the amount every two weeks. For the standard monthly payment, you will make only 12 full payments each year. However, bi-weekly payments allow you to make 50% of your payment 26 different times in a year. Now you’ve made 13 full payments each year which means that an extra payment will be paid annually. With this, the duration of your loan is shortened by a few months.
Also, bi-weekly payments lower your interest rate since your balance will be reduced at a quicker rate.
2. Use bonuses, pay raises and tax refunds to pay the car loan
Another vital strategy on how to pay off car faster is taking advantage of other sources of extra money such as bonuses, pay raises and tax refunds to pay your loan. Because the extra money is usually small, it’s easy to spend it on frivolous things that are not needed. Instead of spending this extra money on unimportant things, you can decide to use it to settle your debt.
3. Get another job
If your current job gives you enough time to pick up additional work, don’t hesitate to do so. Getting another job provides you with extra money that can be spent on paying off the loan. Furthermore, it will keep you busy and prevent you from spending more money on unnecessary things.
So, what are the extra jobs that you can pick up? These extra jobs include:
- Freelance jobs such as writing or web design, or a virtual assistant service
- Walking dogs
- Cab driving
- Affiliate marketing
- Selling your electronics, clothes, books, and other unused belongings online
4. Take advantage of car loan refinancing
Perchance you bought your car when your credit score was bad, but it has improved over the years. Consider refinancing your car loan at a lower interest rate. To do this, check your credit score to be certain of how much it has improved. Get the details of your current interest rate and look for financial institutions or credit unions that can offer you a lower rate. Afterward, refinance your car loan at a lower rate and shorter term. To finance your loan for a short term, you should see that the amount of your monthly payment is increased.
5. Use the snowball debt payment method
If you have several debts, you should use the snowball debt payment method to settle your debt. When it comes to how to pay off your car loan faster, this method gives you one of the best results. First, gather the extra money you have and pay off your lowest loan. Then add the money you used to pay for the lowest loan you paid off to the next loan. This will ensure that you pay off the next loan quickly too. Do the same thing for the other loans you have until you are completely debt-free.
Alternatively, you can start using the snowball debt payment method with your highest debt. Nonetheless, if you want this method to work for you, you must avoid getting a new title loan on your financed car until you have paid off all existing loans.
6. Look for a lower auto insurance rate
Lowering your auto insurance rate has always been one of the most dependable and fastest ways to pay off a car loan without increasing your financial burden. When exploring this strategy, you need to dedicate time to shopping around for a cheaper auto insurance rate.
Start by getting assistance from your insurance agent about different methods to reduce your insurance rate. Get cheap insurance quotes from different companies and go for the one with cheaper rate. Put the money you saved on insurance towards paying off your debt.
7. Utilize paperless statements
When loan companies offer paperless statements to their customers, they save money on paper billing. However, many customers prefer paper statements to paperless ones. As a consequence, some of these loan companies offer their customers extra discounts whenever they sign up for paperless statements. Therefore, you can sign up for paperless statements when getting loans so that you can get discounts on the interest rate of the loans.
8. Utilize coupons
Although this strategy is probably one of the last things you would think of when looking for how to pay off car loan faster, it works most of the times. Do not overlook coupons; look for stores that offer them and use them to reduce the costs of your groceries. Also, it would help if you only used them on groceries that you truly need.
At the end of the month, calculate how much you have been able to save on your groceries. While the amount may seem insignificant at first, it accumulates to become a large sum of money. Use the amount saved on the grocery to pay parts of your car loan.
9. Stop or reduce your cable or satellite television bills
With an average American home paying as much as $200 each month on cable and satellite bills, stopping or lowering your cable or satellite TV payment can go a long way in ensuring that you pay off your car loan faster. If you have problems with staying in your homes without getting any form of entertainment, you can downgrade your TV package to something that costs less than the one you are currently on.
Better still, you can do away with cable and satellite TV bills and choose cheaper alternatives like internet TV services such as YouTube, Chromecast, Netflix, Amazon Stick, and Hulu. Whatever amount is saved on reducing your cable and satellite TV bills should be spent on paying off your loan faster. When you have paid off your loan completely, you can reward yourself by reconnecting the cable and satellite TV services.
Are You Ready to Pay off That Car Loan Faster?
You should be ready to encounter challenges in your quest to pay off your loan fast because learning how to pay off car faster and sticking to the strategies take lots of efforts and determination. Nonetheless, if you are willing and determined to achieve financial freedom, paying off your car loans and other loans should be one of your priorities. Start today, and you will be happy for doing so at the end of the day.