Right now, people in the US are dealing with $1.18 trillion in car loans. In 2019, the average auto loan amount for a new vehicle was around $32,187. If you’re one of those people , this piece is for you. We’re here to tell you how you can get out of auto debt quickly.
If you have a car loan with a high interest rate, it is important to get rid of the loan as soon as possible. The longer you keep the loan, the more money you will end up paying in interest. In addition, the sooner you get rid of the loan, the sooner you will own your car outright. This will give you more freedom to sell or trade in your car if you choose to do so.
Paying a car loan off early can also help you reap many other benefits – ranging from saving money on interest to building a strong credit score and using the saved money on other things.
However, the question is: How can you get out of a car loan as soon as possible, without disrupting your budget?
Fortunately , there are many ways. Below are some of them:
Make Bi-Weekly Payments
If you’re looking to save money on your car loan, you may want to consider making bi-weekly payments. This type of payment schedule means that you’ll make 26 payments throughout the year, rather than the usual 24.
The benefit of making bi-weekly payments is that you’ll pay off your loan faster and save money on interest. If you have a $20,000 loan with an interest rate of 5%, for example, you would save over $2,000 in interest charges by making bi-weekly payments.
Round up your payments
A lot of people don’t know this but if you have a car loan, you can really benefit from paying round-up payments. What this means is that you can round up the payment amount on your car loan each month and this can help you to pay off your loan faster.
There are a few benefits of doing this. One benefit is that you will save money on interest. The more money you pay each month, the less interest you will have to pay in the long run. This can save you a lot of money.
Make Extra Payments
There are a few different ways to make extra payments on your car loan. One way is to simply make bigger payments when you can. If you get a bonus at work or some extra money from a side gig, put it towards your car loan. Another way is to make payments more frequently. Instead of making one payment per month, you could make two payments per month or even weekly payments. This will help you pay off your loan even faster.
Refinance Your Loan
If you have a car loan with a high interest rate, refinancing your loan could help you to save money in the long run. By refinancing your loan, you could potentially secure a lower interest rate and monthly payment. This could free up extra money each month that could be used to make extra payments on your car loan, helping you to pay it off more quickly.
If you are considering refinancing your car loan, be sure to compare offers from multiple lenders to find the best rate and terms for your needs.
Cut back on Expenses
Take a close look at your spending and see where you can cut back. Do you really need that daily coffee? Are you buying too many clothes or going out to eat too often? There’s no need to deprive yourself, but trimming back on unnecessary expenses can free up a lot of money.
Can you carpool, take public transportation, or ride a bike more often? Reducing your transportation costs can save you a significant amount of money each month.
Many lenders offer auto-pay options that allow you to set up automatic monthly payments from your checking or savings account. This can help you stay on track with your payments and make it easier to pay off your loan early.
However, you need to find out whether paying off your loan early will trigger any prepayment penalties. These are fees charged by some lenders if you pay off your loan before the end of the loan term. These fees can range from a few hundred dollars to a few thousand dollars, depending on the lender. Be sure to check with your lender to see if they charge prepayment penalties before you make any decisions.
Use Spare Money to Pay Off Your Loan Via an App
Apart from all the general methods mentioned above, there’s one more way to get out of car debt, and it’s more money-saving than the others. It’s an app.
You can get a Paydown Rewards Debit Mastercard® and pay your car loan using spare change from your daily transactions. Through the app, you connect your account to your loan account, and use your saved money to pay your car loan. It not only helps you to pay off your car loan early, but also provides you with lots of other benefits – including cash back and more savings.
If you want to find out more about this last method to get out of auto debt, reach out to us at Paydownhero.