Paying off your car loan can take years, but did you know that there are ways to pay off your car loan faster? Plus, quicker repayments can also help reduce the interest and allow you to save money for other expenses.
Here’s a guide on how you can complete your car loan repayment before the end of the loan term.
Round-Up Your Repayments
Banks and car lenders divide your repayments automatically over the life of the loan. When paying off your monthly dues, round up your repayments to what you can afford to pay off your loan faster and save on interest.
For example, if you borrowed $13,000 at a 5% interest rate for 72 months, you are required to pay $209 monthly on your loan. If you consider rounding that up to $250, it will help you pay off your loan faster. This way, it will also reduce the amount of interest you’ll need to pay overall. You will save at least $395 in interest.
Increase Repayment Frequency
Lenders require the borrower to pay principal and interest when getting a car loan. But the good thing about this is you can increase your repayment frequency in the first few years of your loan so you can reduce the overall interest. It will also shorten the time you are in debt. Make sure to ask your broker about this before getting the car because some lenders won’t allow you to make extra repayments.
Start with a Low Fixed-Interest Rate
Getting a car with a low fixed interest rate to start with is one of the best ways to help you pay off your car loan faster. It’s important to find a loan with minimal fees and flexible repayment options to reduce the costs and make it easier for you to repay the loan. Low rate loans at Aussie Car Loans helps you to save money on car loans.
Refinance Your Car Loan
If you’re in good financial standing or have made good progress on your loan without missing payments, you may apply for a car loan refinance. Refinancing your car loan simply means switching your current car loan from one lender to another in order to get a better deal and save money. A car loan refinance is used to lower the interest, which can reduce your overall repayments. If you can afford to pay off your loan in a shorter time frame, it will help you save even more. It’s best to speak with a loan consultant to see if a car loan refinances with shorter repayment terms are right for you. But make sure you’re not increasing your loan term and don’t have to pay any additional fees.
Consider a Balloon Amount or One-Off Payments
Another way to pay off your car loan faster is to consider a balloon amount payment. The balloon payment will allow you to lessen the fixed payment amount and make a larger payment at the end of the loan term. Balloon payments are good for borrowers who have excellent credit and a substantial income.
Aside from the balloon payment, another option to pay off a car loan faster is to make a one-off payment. Whether you have extra cash, or you were able to manage your budget well enough to have funds leftover at the end of your pay period, you can instantly put it against your debt to help pay it off sooner. Just make sure this is allowed in your loan contract before signing anything.
Consult with Aussie Car Loans
If you’re financing a new or used car and you want to have an idea of what your car loan repayments will be and how much you can borrow, you can use this easy to use car loan repayment calculator. Simply type in the loan amount, the interest rate, frequency of repayments you desired, and the loan’s length. If you are paying a balloon amount, you can include this too.
It will also help to consult with a loan expert who can assess your finances and recommend the best car loan product that suits you. Call Aussie Car Loans at 1300 889 669 to speak with one of the professionals and get a loan pre-approval when submission starts back up.