So you’ve been saving up for a new car and finally feel that you’re ready to sign on the line and drive away with a new set of wheels. Know that your work isn’t done once you’ve had an easy car financing process; you’ve got to keep up with your payments if you hope to keep your new car from being repossessed. Here are a few tips to help you pay off your car note faster so that you can become its legal owner and have one less monthly bill to worry about.
Check Your Financing Paperwork
Before diving headfirst into paying off your car as quickly as possible, you need to read over your financing paperwork to make sure you can do so without suffering penalties; some lenders penalize borrowers who pay off their loans early. Early payoff penalties are most common for borrowers who have low credit scores and high interest rates attached to their loans.
Make Bi-Weekly Payments
Rather than making a single monthly payment, split your payment into two and take care of it every two weeks. This way, you’ll make an extra payment every year. Something else to think about with this particular tip is the fact that you’ll pay more principal and less interest on your loan as time goes on. Even if you manage to secure financing with low interest, paying any interest at all is essentially a waste of your money.
Round Your Payments Up
Whatever your monthly loan amount is, round it up. For example, if you owe $307 a month, bump it up to $350 instead. If your payment is $363, round it on up to $400. Know that every little bit helps, so don’t feel that a few dollars don’t make much of a dent in your total loan amount. Rather than rounding up, you may prefer to throw an extra $50 or $100 at your car debt as your budget allows.
Refinance Your Loan
It takes time to pay off a car, usually several years. In that time, you may manage to improve your credit score and overall financial health. If you do, be sure to explore your options for refinancing your car loan, which may net you a lower interest rate and a lower monthly payment. Know that if you choose to refinance, there are some additional fees involved, so make yourself aware of them before you agree to anything.
Even if you have a better credit score and are in a better financial situation than you were when you first financed your car, you do not have to stick to your new, lower monthly payment. After refinancing, pretend as if your interest rate and payment amount are the same. That way, you can pay off your car even faster.
Devote Extra Income to Your Loan
When/If you receive a tax return, a bonus check or a raise at work, consider using a percentage of that windfall on your car note. While being responsible with your extra cash may not be the first thing you want to do, your future self is sure to thank you, as are your future finances. Indulging in a light shopping spree or treating yourself to a spa day or vacation may lift your spirits, but how long will that high last? Now think about the lingering satisfaction that comes with freeing up hundreds of dollars a month when you’ve finally completely paid off your car. Short-term sacrifice is always worth it if it results in long-term gain.
Don’t think of your car loan as just another part of life. With these tips and a generous helping of self-control, you don’t have to be saddled with debt a minute longer than necessary.