According to the statistics, about seven out of ten people still borrow money to purchase their vehicle. It is noticed that people prefer financing their car from the bank and paying EMI as per their vantage. While a bank is an option, one also borrows money from private lenders.

If you are one of those who prefer to take a loan for purchasing a vehicle, you may have to take at least 60 to 72 months to repay the loan. It is obviously a lot of interest to pay on the actual loan amount. To avoid paying too much interest, you must follow the tips on how to quickly pay off a car loan and save money quickly.

Here Are Six Tips On How To Pay a Car Off Faster:

  • Pay Half Of Your Monthly EMI Twice In A Month

This may appear to be a wash, but if your lender allows it, you should do it. You’ll make 26 half-payments each year if you pay every two weeks. This equates to 13 complete payments each year rather than 12.

If you had a $100,000 loan for 60 months, you would save just approximately $35 in interest, but you will return the amount in 54 months rather than 60. That’s six months of your life back, which might make a move simpler if you’re compensated every two weeks.

  • Round Up Repayment Amount

This may appear to be a wash, but if your lender allows it, you should do it. You’ll make 26 half-payments each year if you pay every two weeks. This equates to 13 complete payments each year rather than 12.

If you had a $100,000 loan for 60 months, you would save just approximately $35 in interest, but you will return the amount in 54 months rather than 60. That’s six months back in your life.

Instead of merely paying the minimum, round your payments up to the closest $50 to help pay off your auto loan faster.

If you borrowed $10,000 at a 10% interest rate for 60 months, your monthly payment would be $212.47. You’ll pay off your auto loan in 60 months, having paid $2,748.23 in interest.

However, if you round up and pay $250 each month, you’ll pay off your auto loan in 47 months, having spent only $2,214.69 in interest – a $533.54 savings!

With Paydownhero, you can even take the change from each of your transactions and put it into your loan repayment amount. It will significantly reduce your monthly payment amount.

  • Make One Significant Extra Payment Per Year

This is the one-time rounding up method. But it makes no difference when you do it.

Assume you borrow the same $10,000 for 60 months at 10% interest. If you make an extra $500 payment yearly, you will return the debt in 49 months, having spent $2,279.35 in interest – a $468.88 interest savings.

  • Never Miss A Payment.

Some lenders will allow you to miss a payment once or twice a year. Avoid the temptation. Skipping payments will increase your loan’s duration and interest costs.

 

  • Make At Least One Large Payment During The Loan Term.

And the savings keep coming. You may save even more on interest by making at least one substantial supplementary payment yearly and getting cash back on a debit card. Remember, the sooner you make your large payment, the sooner you’ll know how to pay a loan off faster, and the sooner you will be able to pay off your auto loan.

  • Refund Your Loan

You take your loan here and arrange a new monthly payment and pay-off date. Do this only if it results in a cheaper monthly payment and/or a faster pay-off date.

Otherwise, refinancing is pointless. You don’t want to reduce your monthly payment while increasing your loan period since you’ll end up paying the same amount plus a lot more interest.

Is It Even Worth Paying Off Car Loan Quickly?

While paying off your auto loan early might save you money, it can also harm your credit score.

When you make a significant modification to your credit history, such as paying off a loan, your credit score may fall somewhat. If you have no bad items on your credit report, this reduction should be transitory; your credit scores will climb again in a few months.

Moreover, keep in mind that even after your loan is paid off and the account is closed, your auto loan will remain on your credit report for up to 10 years and that the loan will continue to have a favorable influence on your credit history as long as you always make your payments on time.

Although closed accounts still influence your credit score, open positive credit accounts have a greater impact than closed ones.

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