Loans, especially car loans, could be a huge pain in the ass for people who wish to save more. Car loans, like any other type of loans, are subject to interest rates. Luckily or unluckily for you, your interest rate is dependent on your credit score.
Automatically, this means if you are financing a car with a bad credit score, you end up with higher interest rates, compared to if you did so with a good credit score. Either way, you would be paying some interest rates whatsoever.
Unfortunately, a car loan could take you 60-72 months to pay off. That’s five to six years. By then, the interest paid might be as much as the principal loan itself! And, of course, you do not want that.
So, here are some smart tips on how to settle your car loan early enough, giving you enough time to focus on other things that demand your attention.
Why Don’t You Engage in Half-payments Fortnightly?
This would be super-helpful. There are 52 weeks in a year; if you pay half your monthly installment every two weeks, you end up paying 26 times in a year, which sums up to 13 full payments; instead of the conventional 12 full payments in a year.
So, if you had 72 months to pay up a loan, you end up fully paying the loan in 67 months, instead of 72 months. That gives you 5 full months to recover from the grip of the loan.
Never Skip Payments
Have you ever come across lenders who grant you the luxury of skipping one or two monthly payments every year? If you haven’t, well, I have.
And this is what I’ve got to say about it: When you skip payments, you end up doing more harm than good to yourself. Not only do you lengthen the number of months you’ve got to pay, but the interest rate also gets hiked up.
The bottom line is, never skip payments. Be committed.
Make that Super-Large Payment At Least Once a Year
There would be times when you would hit that big contact that brings in lots of cash into your wallet. You might want to give out the usual monthly payment to the lender but don’t.
That’s the downside of monthly payments. It makes you lackadaisical. Why pay $200 when you’ve got an extra $300 doing nothing in your back account? Take that bold step of letting out more than was bargained for. And just then, the savings continue.
You get to save more; given that you get a lowered interest rate as well as a reduced pay-off date.
Refinance Your Loan
If you notice your monthly income is higher than you projected, why don’t you refinance your loan to increase your monthly payment? Doing so would help you secure a closer pay-off term.
Round-Up Your Payments
Imagine rounding up every single payment to the nearest $50; how quickly would you settle the loan? Faster than you think!
For instance, if you were to make a $222 payment every two weeks, round it up to the nearest fifty bucks. Do the mathematics and you get a $250 fee to settle. That gives you a $28 heads up for the next month. Do the same in subsequent months; and in the blink of an eye, you are done!
Have an Accountability Partner
Your spouse, a relative, a friend; just anyone who can help you access your commitment level; cross-checking if you are keeping your payment schedule.
This would be particularly helpful for you if you see being disciplined on your monthly spending as a difficult task.