There are some constants in the financial world, and one of them is these: Don't have more debt than you need. Thankfully, there are ways to keep your debt to a minimum, and this can be very important for some forms of debt - particularly for larger and more expensive debt, like that which comes from a car payment. As such, here are a few ways to pay off your car loan faster.
A Car Loan is a Good Idea
For most of us, shelling out the amount of money necessary for a car loan is simply not an option, as the vast majority of us do not have that kind of cash lying around. That being said, there is nothing wrong with taking out a car loan. The basic principles of personal finance dictate that there is nothing wrong with paying for a long-term asset over a long period of time. Furthermore, car loans are usually not like credit card loans: The interest rates are typically relatively low and manageable, particularly if you've been able to maintain excellent credit. Last, a car loan, when paid on a regular basis, can help to keep your credit report in the best possible shape.
Tips to Pay Off Your Car Loan Fast
- Pay bills online: Paying your bills online comes with many benefits. The processing is typically instantaneous, and you can make sure that you set up recurring payments. This ensures that you won't forget to make a payment and that they can be done automatically. You also never have to worry about the post office, a lost check, or a processing error - everything happens automatically and payments are credited to your account almost instantly.
- Pay multiple times a month: This may not be the case for every loan, as it depends on the way you are calculated. However, for some loans, paying repeatedly over the course of a month may reduce the interest expenses you incur, ultimately increasing the speed at which you can pay down your loan.
- Pay a little extra: Even if it is just a few dollars, every extra payment that you make can get your overall principle down. This, in turn, leads to lowered interest payments.
- Refinance: Interest rates are constantly changing, and right now, interest rates are at an all-time low. You can refinance your loan for a lower interest rate, then continue to make the same amount of payments over the lifetime of your loan. This means that more of your payment will go towards paying down the balance of the loan, rather than paying off interest. This, of course, means that your loan will be paid off faster.
To be sure, many of these methods require that you have the financial means to make additional payments or the credit to get an excellent rate on refinancing. However, these methods are absolutely worth investigating, as doing so can lead to a faster loan repayment - leaving more money in your wallet!