Statistics show that 91% of US households own at least one car, and out of those cars nearly 85% of them are financed through a loan or lease. That means a whole lot of us have an auto loan! For those of us that budget our expenses (who doesn’t?), that car payment can be one of the biggest bills each month coming out of our wage. Paying off your loan not only opens up some funds to use elsewhere e.g. in your business, it also really helps boost your credit as well.
So, besides making your monthly payments on time or winning the lottery, what is the best way to pay off a car loan? Check out these useful tips for paying off your auto loan (or any other debt you may have).
Simply Make More Payments
Instead of paying your bill on the due date, pay half the amount every other week. It’s the same amount every month, helping to keep things within your budget, but it helps to save interest by making more frequent payments. While it might not seem like much at first, the interest you have avoided will add up in no time, potentially saving you thousands that you can use in your business.
Round It Up
Examine your monthly budget, and find out how much extra you can pay on your loan each month. This might involve cutting out some funds for extracurricular activities, but even rounding up the cents to the next dollar will help shorten the term of your loan. If it’s possible, round up to the next 100 (example: round $220 up to $300), or simply add what it is you can afford to pay.
Combined with bi-weekly payments, this will drastically reduce interest and help you to pay off that car loan even faster.
Make An Extra Payment
If bi-weekly payments aren’t a possibility, then try making one extra payment a year. It will achieve the same results, and can easily be done with a tax return or bonus at work. You could also divide your monthly payment by 12, and add the number to each payment to equal one extra payment a year.
Finding Extra Funds
It isn’t always an option, but if you can find a way to net some extra monthly earning then use them to help pay off your loan. Some people sell things they no longer need on Ebay or elsewhere, others pick up side jobs like LiveOps that allow them to work from home while creating their own schedule. Driving for Uber is another popular option these days with over 160,000 people making extra money in their spare time from it.
Using a site like Credit Karma allows you to view your credit score for free. If you have semi-good credit, then you can refinance your loan through a bank or credit union. If you acquired your loan from a dealership, then the idea of lowering your interest rate to 3.16 or even 2.25 percent should sound exciting!
The better your credit score, the better the rate you will be able to find. If your score isn’t ideal, then there are still plenty of companies that will work with those who have bad credit. Auto Credit Express and Capital One are two of the most highly recommended companies for just that.
Closer to Being Debt Free
What’s the best way to pay off a car loan? There is no one sure-fire option, but the tips above can really help you pay down the cost of your loan while saving you thousands in interest which can be put to better use in your business. Making these minor changes will open up extra funds for your monthly budget, boost your credit, and help you become one step closer to being debt free.