Most people need to borrow money to buy a car – new or used. The average new car loan is around 72 months long with interest rates as high as 6.6%. That’s six long years of payments ahead! If you’re wondering how to pay down a car loan faster, here’s the good news: In just a few minutes, you can make some simple changes to pay down auto debt faster and save.
Depending on one’s credit score, some car owners pay interest rates as high as 19.85%. Borrowers end up paying much more than the sticker price. Paying for six years of interest may cost you thousands. Your car could turn “upside-down” when your loan balance is higher than the vehicle value. Start saving money by paying down the loan earlier and use small automated payments to make it practical. Why not save significant time and money? Keep reading for key strategies for paying down debt fast.
Pay a little extra monthly
Let’s say you’re dealing with a loan at $250 a month for 72 months, and you want a way of paying off a car loan early. Making small yet frequent payments as quickly as possible is the best way to pay off a loan early. And that is on the low end. It is estimated in 2022 that the average monthly payment for a new car is $609 and $465 a month for a used car.
Automatic, monthly round-up payments are manageable for most people. Even $50 in monthly roundups would reduce your loan balance by $600 a year.
To put this into perspective, imagine for each everyday purchase you made, you rounded up the cost to the nearest dollar. A few cents here and there may not seem like a lot, but the average American accumulates $40/month in simple round-ups alone. If you put that $40 toward your loan each month, you could save nearly $2,000 in interest over four years! The long-term effect of making small yet frequent payments is significant and easy to do.
Take a pass on skipping payments
Many auto loan providers will give you a pass on a loan payment once a year. It looks good at the moment, but it’s not your friend for paying off your loan sooner. It can add as much as half a year to your overall payment time, although it won’t affect your overall interest.
Use a spare change savings app
Have you ever noticed how most transactions end with some odd amount of change, such as $23.72? The extra 28 cents that would round that number up to $24 is financially meaningless for most people. That’s where a spare change savings app like Paydownhero comes into the picture. So, how does an app like this work?
1. Download the app
First things first, download the app to your phone. Once you download it, you can create an account.
2. Link your financial accounts
Once you get your app account set up, all you’ll need to do is link both your financial accounts and car loan account. After that, you’ll shop the same way you always do. It doesn’t take long at all to do this–2 minutes, maybe!
3. Transaction processing
The app rounds up each of your purchase transactions consolidate your roundups and put them aside to pay down your car loan faster and easier. The app automatically sends the accumulated amount to your loan provider every month. As long as you keep making your regular loan payments each month, those additional small payments will slowly chip away at your interest and principal. Depending on how often you shop, this strategy can add up to an extra $40 or $50 toward your loan.
Paydown Hero doesn’t cost much – A subscription of $1 a month and 2.5% of the money we move for you. That’s it!
You can pay down debt fast
Paying off a car loan early is an achievable goal. It merely takes a little planning on your part and budgeting some extra money for your loan payment each month. Paydown Hero gives users a hands-off approach to paying down a loan by automatically rounding up your purchases and putting the extra money toward your loan payments. Just download the app, create an account, and Paydown Hero does the rest. It doesn’t cost much, and we save users thousands of dollars over their loan terms.
Learn how we can help you attack and pay down your auto loan debt faster!