How To Pay Off Your Car Loan Early By Treating It Like A Mortgage
Car payments can be a real pain. Every month you drive your car the value of that vehicle depreciates. The moment you drive it off the lot, you’ve already lost approximately 10% of the value of the automobile.
Paying off your vehicle as quickly as possible is a great way to still have value in the vehicle when your payments have come to an end.
Here are some very simple ways you can save some money and pay off your vehicle at a much faster rate.
The 13th Payment
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Much like experts suggest with a home mortgage, making an extra payment every 12 months can go a long way towards ridding yourself of numerous payments.
If you have a $10,000 loan over a 60-month period you’ll pay only 49 months of payments by simply paying an addition $500 per year. As an added bonus, you will save nearly $500 in interest by paying your loan off 11 months early.
Split Your Payments To Make Up The Difference
We’re fully aware that not everyone can easily come up with an additional $500 on the spot. If you want to go this route you can ask to split your monthly payments into biweekly payments.
If you get paid every other week, you’ll end up making 26 payments in a year or the equivalent of 13 full payments.
Pay More When You Have The Cash
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Not everyone can afford to pay $500 extra per year. If you’re cash-strapped there’s always the option to pay more when you have the cash.
During your monthly or bi-weekly payments an extra $25 to $50 can go a long way. Even $25 per month could save you more than $100 in interesting over the next five years.
Refinance Your Vehicle And Keep Your Payments The Same
Refinancing your vehicle after you’ve made a considerable number of payments can help in paying off your loan at a faster rate.
During my last vehicle loan, I refinanced my $20,000 Dodge Dart after completing $10,000 in payments. My interest rate slightly decreased and my monthly payment was nearly cut in half thanks to a 60-month refinance deal.
Instead of reducing my payments, I continued to pay $350 per month and made an extra payment in month 12. This process can save hundreds of dollars and help pay off your loan at a faster rate.
Change Your Insurance Company
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We recently wrote about a company called Metromile which allows insurance customers to pay a small flat-rate fee and $0.05 per mile. If you don’t drive thousands of miles per month you could save a lot of money on your insurance. You can learn more about Metromile here.
After you find a cheaper automobile insurance company, take the savings you have just received and use that money to make an additional principal payment on your auto loan.
