Taking on car loan debt is a significant endeavor, but adding another monthly bill can add more stress. Sure, lenders are making monthly payments easier to take on, but the commitment is a double-edged sword. Why? Because a loan is often stretched over a longer term to accomplish this.

Buying a car is a big deal. It may be both your biggest debt and your biggest asset. The excitement of your new wheels may come with the added stress of new bills. Before you celebrate the new “low monthly payments!” loan, you need to clearly understand that more debt will take longer to pay. Six years is now the average length for a new car loan; on average, new car borrowers pay about $563 a month.

As a result, not only will it take longer to pay off this loan, but you’ll end up paying more money in the form of interest. That means that by the time you pay off your loan, you will have spent far more on your car than the purchase price. Paying off a car loan early, however, can save you both time AND money rather than buckling in for a long 6-year ride of paying even more interest!
So, how can you save time and money, and what are the best ways to pay off a car loan quickly?

Paying Off Your Car Loan Starts With Understanding Your Terms

Before you begin paying off your car loan, make sure you understand the terms you agreed to when you took out your loan. Here are some examples:

Early Payment Clause

Check if your loan has an early payment clause. Some car loans will penalize you with fees if you pay off your loan early. If there is a fee, consider whether it will cost more than the total amount of what you’ll pay in interest.

Principal and Interest

On top of understanding early payment penalties, know that there are two parts to your car loan payment: principal and interest. Your principal is the amount you initially borrowed. The interest is the cost of borrowing that money, which you will have to pay in addition to paying back the principal. If you can lower your principal amount, you will reduce the total amount to pay off your car. Plus, you’re saving some of what they would have charged you in interest.

Amortization Versus Simple Interest Loans

Different loan types determine how and when you make payments. An amortized loan, for instance, includes scheduled monthly payments. These payments apply to your principal and to what you owe in interest. However, in an amortized loan, most of the interest will be charged early in your payment schedule. So, paying your loan down sooner than later will save you the most interest.
A simple interest loan is shorter in term length and has higher interest rates than an amortized loan. The amount you pay toward your principal and interest, however, stays the same in every payment. Although you might make higher payments for a simple interest loan than for an amortization loan, you can end up paying less capital overall.

Paying down debt

You can pay down debt faster by making more sizeable and frequent payments. It’s easier said than done, but it’s worth it. See how to pay down debt using these simple strategies:

Make extra payments each month

Don’t stress. When we say “extra,” we don’t mean a full payment. Although, if you can muster that, more power to you. If not, even an extra small amount each month will still lower than the principal we mentioned. These payments add up, and in turn, you’ll save on interest.
For example, if you contribute an extra $50 each month on a $10,000 amortized loan over 5 years, with a 7% interest rate, you’ll save almost $500 total. You can also use mobile round-up apps, like Paydown Hero, to help make your savings easy and automatic.

Snowball that debt

Repaying your car loan can get tricky if you have other debts to manage. If this is the case for you, you may want to use a “snowball” strategy to help pay down your debts faster. The term “snowball” refers to paying off one debt at a time, usually starting with the smallest debt before moving on to the next biggest one. You’ll want to continue making monthly, minimum payments on your other debts. Otherwise, you could incur late fees. As you eliminate your debts, you will free up money you can use toward the next one.

Use extra money

If you have extra money available from a side gig, bonus from your work, or tax refund, consider using this to help pay off your auto loan faster. This tip is beneficial if you are upside-down on your car loan, which is another way of saying you owe more than what the car is worth.
This typically occurs when the interest rate on your loan is high or you bought an overpriced car. It can also happen if your car’s depreciation rate, the rate at which it loses value, outpaces how much you still owe on your loan (because no matter what, your vehicle will lose its worth over time). Its condition and model will also impact the rate at which its value falls.


You can make or save extra cash by canceling online subscriptions you don’t need or by taking on a second job or side hustle. A side hustle comes in different forms: extra jobs, coupon savings, selling used items, Uber, etc. The digital realm is home to many apps built for investing and making a little bit of money on the side. These extra dollars can add to your efforts of paying down debts, no matter how small.

Small steps add up

Researching ways that work for you, individually, is one key to success. Your devotion to paying off debt will also play a part. The point is it doesn’t matter how small your efforts are; every small step helps lower the principal and saves you on interest.

Paydownhero makes paying off auto debt easy

At Paydownhero, we aim to make paying off your car loan effortless. When you use our app for daily purchases, Paydown Hero automatically adds additional payments to the ones you’re currently making. In other words, when you make daily transactions, PayDowHero will automatically round up your spare change to the next dollar. Our app will then send these additional payments toward your car loan, hence the term “Roundup.”

A small change that can result in real savings. In turn, it also makes extra payments by rounding up your daily transactions to the nearest dollar and applying that rounded-up amount to your car loan.

Roundup apps like Paydown Hero can help in many ways. Positive actions that work automatically, can support real change. For example, if you pay 15% interest on your car loan, but you use a roundup app to fund your “high yield” 1% APY account – you may want to review the best saving strategies for your personal budget.

All we do is simply help lower your principal faster. We give you double the value: putting your spare change toward your debts AND saving you on interest charges.

Learn more about our process and start paying off your car loan today!

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Start rounding up and saving to pay down your car loan faster