3 Strategies to Pay Off a Car Loan Early
If you want to pay off a car loan early there are a number of ways that you can do so. Having an auto loan just adds to the amount of money that you need to come up with every month to get by. When you have to pay a car payment each month, it costs you money that you could be using to invest. Therefore, it can definitely be to your advantage to get it paid off early. Here are a few strategies to pay off a car loan early.
1. Pay an Extra $100
Paying an extra $100 on your car payment every month can have a huge impact on how long it takes you to pay off. If you can afford to put an extra $100 with your car payment each and every month, the extra money will go towards the principal of the loan. This will help you get the balance paid down quicker and own your car debt free.
2. Use Tax Refund
Most people get some type of a tax refund every year at tax time. Sometimes, this can amount to several thousand dollars depending on your income and tax deduction situation. Most people take the refund and spend it on things that they want. Instead of wasting your return every year on something that you don't need, consider using it on your auto loan.
Take your entire refund every year and put it directly towards the auto loan. This will make your car payment for the month and apply quite a bit of money towards the principal. This will make a huge dent in the auto loan and will result in you paying off the loan much quicker than normal. Depending on how big your auto loan is, this might cut the term in half if your refund is big enough and if you do it faithfully.
3. Bi-Weekly Payment
Most people make one car payment per month and don't even think anything about it. However, if you would pay your bill a little differently, it would make a difference. Instead of paying your car payment once per month, cut it in half and pay it every two weeks. Doing it this way will not make a big difference in your overall payment each month, but it will result in you paying off the loan early. By doing it this way, you will effectively be making an extra monthly payment every year. This means that there will be more money going towards your principal every month and it will slowly start to go down. The total amount of interest that they charge you will be less as well since the balance will be less.
You can set this up through your bank or possibly through the auto loan company. As long as you make it automatic, it really does not matter how you set it up. It will still accomplish the same goal.