Are you tired of making monthly car payments? If so, you should consider paying off your car loan early. But how do you go about that?
In this post, we’ll cover 10 strategies and tips you can employ to get rid of your car loan faster than you ever thought possible.
Make An Extra Payment Each Year
The simplest way to pay off your car loan faster is to just pay a little bit extra each month. This will cut down on the amount of interest you have to pay and shorten the overall length of the loan.
The question is, how much extra should you pay on your car loan?
As a good starting point, you should divide the total of one monthly payment by 12, and apply the resulting number to your monthly payment. This simple addition to your monthly payment will add up to 13 payments over the course of 12 months.
The best part about this is that the extra money you put toward your loan will go directly to reducing the principal.
Alternatively, you could just save up and pay one extra payment per year in a single lump sum.
Either way, any additional money you put toward the principal will help you pay off your car loan early.
Live On A Written Budget
If you want to get rid of your car loan as quickly as possible, you need to be very mindful of your spending.
One of the best ways to do this is to live on a strict budget. Track every single penny you spend for a month and then figure out where you can cut back.
You may be surprised by the amount of money you can save by making small changes to your spending habits. Once you have a good handle on your spending, you can start putting more money toward your car loan each month.
Get A Part-Time Job
If you’re seriously dedicated to paying off your car loan early, consider getting a part-time job.
Working just a few hours per week can give you the extra cash necessary to pay off your car loan early.
Refinance Your Car Loan
If you’re stuck with a high interest rate on your car loan, you may want to consider refinancing.
Refinancing is basically just the process of taking out a new loan with a lower interest rate and using it to pay off the old loan. This can help you save quite a bit of money in interest over the life of your original loan.
Additionally, if you choose to refinance your car loan, you should opt for a shorter-term loan.
Sure, this might increase your monthly payment a bit, but it will likely save you a bunch of money on interest, and decrease the amount of time you’re stuck making payments on your car.
Sell Your Car And Pay Cash For Something Cheaper
This might seem a little obvious (and maybe a little extreme), but if you really want to pay off your car loan early, you could always sell your car. This is one of the fastest ways to get rid of a car loan, and thus, a great option if you’re looking to get out of car debt quickly.
If you do choose to go this route, we recommend paying cash for a pre-owned vehicle. That way, you won’t end up trading one monthly car payment for another.
Start A Side Business
Another great way to come up with extra money to pay off your car loan early is to start a side business.
With a little creativity, there are all sorts of businesses you can start from the comfort of your own home.
For example, you could start a lawn service business, offer your services as a freelance writer or editor, or even start a blog and sell advertising space. The possibilities are endless!
The key here is to apply the extra money you earn directly to your car loan.
After all, the more money you can put toward the principal, the less interest you’ll have to pay, and the earlier you’ll be rid of your car payment.
Round Up Your Payments
A great way to make extra payments on your car loan (without having to budget for it) is to round up your monthly payments. For example, if your monthly car payment is $300, you could round up to $325, $350, or even $400.
Use Your Tax Refund and/or Bonuses To Pay Down Your Loan
If you happen to receive a tax refund or a work bonus, you could use these extra bits of income to pay off your car loan early.
Every little bit helps when you’re trying to get rid of debt, so don’t overlook the power of a tax refund or bonus check.
Try The Debt Snowball Method
The debt snowball method is a tried-and-true method of paying off debt. The basic premise is simple: you focus on paying off your smallest debts first, while making the minimum payments on your other debts.
When you pay off your smallest debt, you roll that monthly payment into your next smallest debt payment, and so on.
This is a great way to not only get rid of your car payment but eventually eliminate all of your consumer debt.
Save Up And Pay It Off In One Lump Sum
If you want to get rid of your car loan early but don’t necessarily have the extra money each month to do so, you could always save up and pay it off in one lump sum.
This might take a little while, but it’s definitely doable if you’re patient.
If you choose to go this route, you may want to open up a savings account at a completely different bank than you normally use, and start adding money to it every month. Then, when you reach a point when you have enough to pay off your car loan early, you can pull the money out and go for it.
Always Make Your Payments On Time
Hopefully this goes without saying, but if you want to pay off your car loan early, always make your payments on time.
This is the only way to avoid late fees, which can end up costing you a lot of money in the long run, and eating up additional income that could have otherwise gone toward the principal of your loan.
Automate Your Payments
On a related note, if you have trouble remembering to make your car payment on time, consider using autopay.
Most banks and credit unions offer the ability to make automatic payments, and in many cases, you can even apply a little extra toward the principal of your loan.
Of all the methods on this list, this is probably the most passive way to pay off your car loan early.
Stay Disciplined and Stick To A Plan
Paying off your car loan early takes discipline. You need to be willing to make some sacrifices in order to free up extra money each month to put toward your loan.
This might mean cutting back on your spending, dining out less often, or giving up other luxuries.
Ultimately, it’s important to create a plan and stick to it.
Even though it might be difficult at times, the satisfaction you’ll feel when you finally pay off your car loan early will be worth it.
Paying off your car loan early is a great way to save money on interest and become debt-free faster.
If you’re looking for ways to pay off your car loan early, try one of the 13 strategies listed above.
With a little discipline and perseverance, you’ll be rid of your car payment before you know it!