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A monthly car payment can be a fact of life for most people but paying off your loan in order to save extra money each month can be entirely possible. By setting your mind to it you can get your loan paid off and spend as little in interest as possible. These five tips may not all be easy, but the reward of finally getting your car paid for can be more than worth it.
Table of Contents
1. Know Your Contract
Before you try and pay off your loan early you should be aware of any “early payoff” penalties that may occur. If they exist in your contract, these penalties could mean that you’ll have to spend more to get out of your loan faster. In this instance, you may have to make a hard choice. Unless you’re willing to spend the extra money, you’ll be stuck until the duration of the loan is complete. Balancing the pros and the cons of paying off the loan early or not can ultimately help you make the best decision for your desired lifestyle.
2. Refinance Your Loan
While it may not necessarily lead to paying off a loan faster, refinancing can be a way to spend less interest overall on your car. This can be a great option if your credit score has improved since the time when you bought your car. You may be unsure if your score has improved or not, but it can be worth looking into. If you’ve been making all your payments in full and on time, then chances are your score has improved and you could benefit from refinancing.
One downside to refinancing can be extended loan periods. For example, if you have one year left on your loan then when you refinance you may end up with three more years to pay it off. This can be worth it for the lower interest rate, but it may not be the best choice for everyone.
3. Use Money Productively
When you find yourself in a situation where you have a little extra money, then you can benefit from putting that money towards your loan. While it may not be as fun as blowing the money on something fun, it can be better in the long run. Later, when you’ve paid off your loan you’ll find yourself glad you did as you can enjoy the extra money every month that you don’t have to put towards your car.
4. Cut Back on Expenses
Making some small everyday changes to cut back on your expenses can save you extra money each month that can go towards your car loan. It can be true that every little bit counts when you’re paying off a debt and the changes you make to save some money don’t have to be huge.
A few things you can do include:
- Dropping cable or satellite TV for Netflix or Hulu
- Canceling magazines, memberships, or subscriptions you don’t use
- Turning the thermostat up a few degrees in the summer or down in the winter
- Using coupons and buying less expensive brands of groceries
If you find that you miss some of the things you’ve given up to pay off your loan it can help to remember that the sacrifice is temporary and that you can get it back as soon as the car is paid for.
5. Plan Ahead
While you probably already have a car that you’re paying off, chances are that in the future you’ll want or need something new. If you’re thinking about getting a new car than you should shop around to find a loan that you will be able to pay off as quickly and easily as possible. You can read more about different loan options in order to make an informed choice when choosing a dealership and vehicle.
Stick With It
While paying off a car loan can take some determination and work, it can be rewarding to know that you completely own your vehicle. Being debt free can open up a lot of possibilities in your life and take away financial stress. You should find that sticking with your goal until the end and paying off your loan in the fastest way possible is an accomplishment that is more than worth the
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