How to Pay Off a Car Loan Faster
Finally got your car loan approved? Cheers! Unfortunately, getting your car loan approved is only the first step in acquiring your dream car. And honestly speaking, it is the least of your worries. The most difficult endeavor in store for you is the process of paying all your loan back.
Ultimately, your goal upon getting your car loan is immediately paying the debt off. Some people opt to find the car loan that would work for them best by looking for deals with the lowest interest rates and shortest terms possible, but more often than not, these kinds of deals are only given to those with a high credit score or good credit history.
Otherwise, you can just commit to pay off your car loan early. Choosing to pay your car loan off in the shortest amount of time possible can help save a significant amount in interest than that of a loan with a longer term. Getting the loan out of the way can lead to more money available for savings, bills, and other expenses. Not only that, getting the car loan over with can take a huge weight off your chest and you can sleep peacefully at night knowing that you don’t have to pay off a big debt anymore.
So, how can you quickly pay off your car loan? Here are some great tips to get you started.
1. Determine if there are early payment penalties.
This is the most important thing that you should know before you speed up paying your car loan. Some financial institutions give early payment fees, so if you plan to pay off early, don’t get a car loan from a lender which charges fees for prepayment.
2. Set aside money for extra payments every year.
Making an effort to give an extra payment every year during your loaning term can take you a long way. These extra payments can help lessen the amount of interest in your loan, as well as cut some time off the duration of the loan. If you don’t want to shell out the full cash in one big payment at the end of the year, you can still achieve this without making a significant strain on your mind. You can do this in two ways:
a.) You can get half of the amount of your monthly payment and pay it every two weeks. Note that there are 52 weeks in a year. If you divide it by two, that would make 26 times that you’ve paid. This results in an extra payment made.
b.) If giving half your monthly payment every two weeks is too frequent for you, then you can opt to divide your monthly payment by 12 and add the result on top of your monthly payment. The extra payments would also cumulate in an extra monthly payment made by the end of the year.
3. Round up your payments
Round up the amount of your monthly payments to the nearest fifties or hundreds. For example, you have a monthly amortization of P17,630. You can round it up to P17,700 or even P18,000. Even though the increase is only a small amount, it will make a huge difference in the long run.
4. Make more money from different sidelines.
If you want to pay off your debt as soon as possible, then you should make an effort to get money from different sources. If you’re employed and you find yourself having several hours of free time after work, you can do online jobs or freelance works. On weekends, you can also do part-time jobs to make your free time productive.
For example, for employed writers, you can do freelance writing on your free time. For employees with an artistic and musical side, you can sell your traditional and digital art or perform in different gigs like weddings or events. If you want to make money, there are a lot of ways to get it from.
5. Any bonus money, or extra cash that you receive, save it for the payment of your loan.
Christmas bonus? Don’t spend all of it on gifts or material things! Put some of it on your car loan payment. Or if you want to speed things up, save it all for the car loan payment alone. Any extra money that you receive should be intended towards your car loan. Remember, the sooner you pay your debts off, the sooner you can enjoy more of what you earn.
6. Cut off the subscriptions that you don’t need anymore.
They are only useless, additional expenses for you. If you have your Wi-Fi and mobile internet plan on top of your TV cable subscription, then you might want to consider cutting off your subscription on one of these. For example, consider that some high-end mobile plans from different mobile network providers typically offer some movies and TV shows channel subscriptions included in the plan, like Netflix or HOOQ. Let’s face it; most of the things today are done online. Movies, anime series, Korean dramas, and even TV series can be watched in the internet today.
So, if you don’t frequently watch the TV during your free time, you might want to cut off your cable subscription. Or if you don’t frequently use your computer at home and are always glued to your mobile, you can opt to cut off your home internet subscription.
7. Sell items and put it on your car loan.
Whether it’s through online or just a garage sale in your neighborhood, you can sell your stuff to make more money – but only if these are things that aren’t necessary to keep anymore. If you’re prone to keeping things aren’t of use to you, it’s time to let them go. Not only will it help you de-clutter, it will also help in making a little bit of money to pay off your loan.
These are some of the ways that you can follow so you can pay off your car loan quickly. Remember, discipline is the key. You need to learn how to budget your finances well and be constant in doing it – at least until you completely pay off your debt. Another tip: don’t ever pay late or even think about skipping on paying your monthly payments completely. Doing so will not only hurt your credit; it will only make you pay the loan longer.