Buying a car is one of the most expensive purchases that a consumer can make. Although you may not be able to reverse vehicle prices, you can still save money on your car loan by lowering the interest, especially if you have less than perfect credit. The first step is to learn how an auto loan works and how can you save money easily with it. Simple interest auto loans don’t have early repayment penalties, along with the way the interest is calculated, you can save money by paying it off faster. By paying off your auto loan early, you can also reduce the interest you will likely end up paying and reduce your overall costs. In this post, we will share some of the possible payment tips to help you save money from your car loan.
Pay In Installments
“Payment splitting” is a great method to reduce interest charges. For example, if your car payment is due on the 24th of the month, you have to pay half of your monthly payment on the 9th of each month and the second half on the 24th. The first payment reduces the interest that accrues in the 15 days between payments. Over the life of your loan, the payment split creates a gap in the amount of interest you end up paying.
Pay By-Weekly
You can take payment by switching over to bi-weekly payments. With this strategy, you split your monthly due in half, but you make it every two weeks. On a bi-weekly schedule, you end up making 26 half payments or 13 full monthly payments in a year, as opposed to 12. Make sure you anticipate your monthly payment and adjust if necessary when using this method.
Pay Rounded Payments
By rounding your car or truck payment number each month, you can reduce your payment plan and the total amount of interest you can afford to pay. For example, if your monthly payment is $328, you can round up to $350 per month. For an extra $22 per month, you can save a significant amount of interest and pay off your loan a few weeks earlier, which makes this plan worth it considering the gap such a small change can have. You can round up your payments to fit your budget. Also, this strategy is non-binding – if money is tight for a month or more, you can stop rounding up your payments for more flexibility.
Pay More if Possible
The best thing about paying off your auto loan early to save money is that increased liens or extra payments don’t have to be regular – you can simply pay more when you have the money. If you pay the key off faster than your usual payment schedule, you’ll spend less on interest and reduce your overall costs. Be sure to talk to your lender to make sure the extra money goes toward lowering the key on your loan.