Wondering why you need to pay more in auto insurance than your car is worth? There are ways you could start to pay off your loan early. Here’s what you could do:
Make Biweekly Mortgage Payments
Though biweekly payments may seem unrealistic, if your lender will allow you to do it you should. Making a payment every two weeks will help you make 26 half-payments per year. That will add up to 13 full payments every year, rather than just 12. Making half your monthly payment every two weeks can help you repay your loan a lot faster.
Round Off the Payments
Instead of paying only what is recommended, round off your payments up to the nearest $50 which can help repay your car loan more quickly.
Make an Extra-Large Payment at Least Once a Year
This is a version of rounding up your payment. However, it doesn’t matter when you do it, but how much you pay in that one-off installment.
If you borrow $10,000 over 60 months at a 10% interest and you make an extra payment of $500 a year, you will actually repay your loan in just 49 months and will have paid $2,279.35 in interest which is a savings of $468.88 in interest.
Try to Make at Least One Large Payment Over the Entire Term
Let the savings continue! By making at least one large payment every year, you’ll save even more in interest. Always remember, the earlier you make your large payment, the sooner you’ll be able to pay off your car loan.
Never Skip a Payment
Some lenders will allow you to skip your payment once or maybe even twice a year. Resist the temptation to do so, as skipping payments will lengthen the term of your loan and end up costing you more in interest.
Refinance the Loan
This is where you would take out a new loan to pay back the old, and negotiate monthly payments and a pay-off date. You should only do this if it gets you a lower monthly payment or even a sooner pay-off date, shortening the term.
In any other case, refinancing doesn’t make much sense. You wouldn’t want to lower your monthly payments and end up lengthening the term of your loan because you’ll soon end up paying the same principal and a lot more in interest.
