Making One Extra Payment a Year Makes a Difference
Monthly payments are expensive enough, the thought of making extra payments can be overwhelming and stressful. However, if you take your monthly payment of, let’s say $360.00, and you divide it by 12, the total number of payments per year, you would get $30.00. If you add that $30.00 to your monthly payment, at a total of $390.00, you would make one full monthly payment early. In comparison to the $360.00 monthly payments, $30.00 isn’t much, but little figures over an extended period of time really stack up and lower your total vehicle loan balance as well as reduce interest payments.
Rounding Your Payments Up Can Help
Another method you can use to pay off your vehicle loan a little faster, is to round your payments up. Assuming your budget allows it, you could add an additional $40-$50 to your monthly payment, reducing the principle balance each month by that little bit extra in your payment. For instance, using the example given above, and assuming that your monthly required payment was $360.00, you could round that monthly payment up to $375.00 or $400.00, effectively reducing not only the principle balance of the loan, but also the interest payments. This may seem like a stretch, but consider the fact that this method allows you to pay off the balance of the loan 2 months early.
Refinancing Strategies to Lower Your Interest Rates
One of the fastest methods of saving money on interest and lowering your car loan payments is to refinance your car loan. Larger commercial banks and financial institutions usually offer refinancing options with higher interest rates than most local community banks and smaller credit unions. Researching and comparing the available resources in your area allows you to determine whether you will be able to refinance for a lower interest rate or not. Generally speaking, a 1% reduction in your interest rate would be worth taking when you factor in that you could maintain the same monthly payment total and ultimately reduce the time it would take to completely pay off your car loan.
Make Bi-Weekly Payments of Half Your Monthly Payment Total
Some lenders and creditors will allow you to make payments every 2 weeks rather than making the once-a-month payment. If your bank or credit union offers this service, take the advantage and use it. By increasing the frequency of your payments, the principle balance of your car loan is credited faster than by making less frequent, or once-a-month, payments. Verification that your lender doesn’t charge extra for this service, and that your contract has no other payment requirements, grants you the ability to save a lot of money on interest payments.
Doing Side Jobs to Generate an Extra Income
Extra income is another great efficient way to pay off any loan a little faster. Putting in overtime at work, offering services on sites like Craigslist, or Fiverr, to tutor, to landscape, paint, or any service you’re good at on the weekends are all good choices, but remember, you’re not restricted in options. Keep in mind that, while working extra hours or weekends for a little more money may be overwhelming, it’s only temporary until you can pay off your car loan comfortably. Also, as a note, think of all the time and money you can save by combining extra income with one of the previously mentioned methods to pay your loan off faster!