Prepayment Penalty: If you can pay off your loan earlier, check whether the terms and conditions include a prepayment penalty. If not, pay it off as soon as you can. You’ll save a lot of money in the long term.
Calculate Savings: Use an auto loan calculator to understand how much you will save in interest if you pay off the loan early. If there are prepayment penalties, factor those in and see if you will still save. Getting debt-free sooner can free up a lot of money.
Consider Refinancing: Car loans come with high-interest rates. Speak to banks, credit unions, and online lenders and see if you can refinance your loan at a lower interest rate and at a shorter term.
Principal Payments: If you’re being charged simple interest, pay it off quickly by making additional payments towards the principal of the loan. It will help reduce overall loan costs.
Bi-Weekly Payments: If you increase the loan payment frequency to every two weeks, you end up making an extra payment every year. This method also reduces your interest paid over the life of the loan.
Roundup: A smart thing to do is round up your payment to the nearest $50. So if you pay $219 per month, round it up to $250. You’ll end up paying the loan up to a year sooner.
Snowball: Pay all the money possible towards your smallest debt or the loan with the highest interest. Then apply the money you were paying for the other debt towards your next largest debt. Follow this pattern until you’re debt-free.
Refunds, Bonuses, And Raises: Use any extra money you get like tax refunds, bonuses and pay raises and apply it all towards paying off your car loan. You’ll be surprised how soon you can get debt-free like this.
Extra Income: Take up non-conventional jobs like renting out a room, yard work, yard sales, house, or pet-sitting to earn a little extra money and use it all to pay off your car loan. Chip away the debt.
Extra Expenses: Cut out everything that’s not essential. Reduce going out for meals and drinks. Don’t buy new clothes for a while. Use the money you save to clear your debt.