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Car payments can be grueling. Not only do you have a payment on your car, but your insurance is higher just because you don’t own the car. With so much expense, paying it off early is a good idea. Here’s how to cut your car loan payment time in half!
How to Cut Your Car Loan Payment Time in Half
Pay Half Every 2-Weeks
Instead of paying 1 monthly payment, pay half your car payment ever 2-weeks. This may seem like it doesn’t do much, but some months have more weeks than others. Making a payment every 2-weeks means you will make an extra payment by the end of the year.
Round Your Payments Up
This is the method we started using when we had our car loan. It may be tempting to only pay your monthly payment, but add a little extra to each payment. For example, if your payment is $292.54, round it up to an even $300. This will help you pay off your car loan quicker without putting too much of a strain on your finances. The extra money will general go toward your premium.
If you make payments online you will see you amount due each month go down but keep paying that $300, it's a great feeling to see that payment keep going down and a great motivator!
Use Your Tax Check Wisely
If you get something back on taxes every year, don’t just blow it. Instead, plop that check on your car loan. Not only will you pay it off faster, but it looks good on your credit as well. You may still have payments to make, but the more you throw down, the less you pay in interest in the long run.
Don’t Skip a Payment
As you add extra payments and plop your tax check down on your loan, you may get the urge to skip a payment. Never skip a payment. Skipping payments lengthen the term of your loan and cost you more interest in the long run. Keep making those payments and you will pay it off early.
Make an Extra Payment Every Year
Another great way to shorten that loan is to make an additional car payment every year. On top of all the above tips, save enough money to make an extra payment. The extra payment cuts off some of the interest you owe making the terms of your loan shorter.
Think of it this way if you have an 8-year term on your car that is 8 extra payments and by paying a little more each month like mentioned above just these two methods will shorten your car loan by at least a year, possibly two years if you stick to it.
Refinance Your Loan if You Can
Interest rates are constantly changing. If you had a high-interest rate when you bought your car, look into refinancing it at a lower cost. This is especially a good idea after you have made a few payments and raised your credit score. The lower your interest rate the more money you will save in the long run. But keep making your original payment even though the amount you owe each month will generally go down!
We find we get the best loan rates with Navy Federal and USAA as a military family so make sure to shop around!
What other ways have you found to cut your car loan payment in half? Share your mad skills in the comments below!