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Most Americans buy their cars on loan. Since the loan is likely to stretch for a few years, there’s a good chance you’ll end up paying a significant amount of money as interest. Repaying your auto loan early could help free up money that you could use for other things. With this in mind, we’ve listed 5 tips to help you pay off your auto loan early.
- Check if you can refinance to a lower-rate loan: If your credit score has improved since when you first purchased your car, there’s a good chance you may be able to refinance to a new loan with a lower interest rate. If you do this, make sure that the new loan has a shorter loan term as well, so you aren’t just paying less every month, but also over the course of the loan term.
- Pay extra whenever possible: If you get a bonus payment at work or happen to make some extra money, consider putting it towards your car loan, no matter how small the amount. Over a period of time, this could add up and help you clear your loan a lot faster!
- Make two payments a month instead of one: Instead of making a single payment every month, it’s a good idea to divide the payment into two and make the payment every two weeks. If you make payments every two weeks, you would have made 26 payments by the end of the year, as opposed to 12 monthly payments. While doing this step alone may not help you pay off your loan early, it will certainly reduce the debt burden.
- Round up your payment: If you usually pay $256 a month toward your auto loan, considering rounding it up and paying $300 every month instead. While a few extra dollars may not make a difference to your monthly budget, it will certainly help you pay off your loan early.
- Don’t skip payments: Don’t ever skip your payments, even if the lender lets you skip one or two payments every year. If you get into the habit of skipping payments, you will increase the term of your loan, and you may also just accidentally skip a payment you weren’t supposed to and bring your credit score down.
Follow these tips and you’ll surely have your auto loan paid off in no time!