A car loan, also known as an auto loan, pays for the upfront costs involved when an individual wants to procure a car. The person taking out a car loan can then repay in installments the principal amount borrowed, along with the applicable interest charges. In this article we will show you how to Save Money On Your Car Loan.
Getting an auto loan should be approached with caution regardless of whether you’re using it to finance a new car or a used one. Remember that you’ll end up paying a significantly higher amount than the vehicle’s actual value if you’re paying for it through a loan.
Indeed, it’s always better to buy vehicles in cash. However, if you can’t wait to save enough money to pay for your car purchase in cash, you’re encouraged to figure out ways on how to save money on the loan you’ll use for financing a motor vehicle. Is it possible? Yes, it is, and below are some tips for you to ponder:
Increase Your Share Of The Total Costs
A great way to Save Money On Your Car Loan is Banks and lenders offer up to 85% of a car’s total costs as the loan amount. Always choose to place a larger down payment if your finances permit. Actually, if you can, increase your share to an amount that will allow you to get the most minimal value from the lender or bank. Doing so cuts the overall interest charges you have to pay for an auto loan, saving you money in the long run.
Round Up Your Installments
If your monthly payment is USD$365, round it up to USD$400. The extra USD$35 can help pay off the loan several months early, not to mention you can also save on interest.
Review your budget, and round up your payments to whatever works best for you. Note that this strategy isn’t binding, so you can always stop for a month or more if money is tight. That gives you added flexibility.
Make More Frequent Payments
Another tip to save on your auto loan is to pay more frequently. For example, try paying on a bi-weekly basis if you used to make payments only once a month. If your budget permits, you can even opt for weekly payments. This strategy helps reduce the interest you have to pay for the loan’s whole life. If you choose to follow the bi-weekly payment scheme, you’ll end up making one extra monthly payment, which really matters.
Refinance Your Existing Loan To Obtain Lower Interest
The last way is to opt for low-interest refinancing. For instance, if your current car loan has an interest of 5%, Try to find a loan that will give you only 3% to 4% interest. It’s possible, especially if you have displayed good payment behavior in the past months and your credit score has improved since the time you’ve bought a car and taken out your auto loan. Save on regular payments in the long run by switching to the other loan.
One of the most expensive purchases that consumers can make is a car. Vehicle prices have risen in recent years, and while there’s nothing you can do about it, it’s possible to save money on your auto loan by lowering your interest charges.
The car loan hacks mentioned and discussed above can help you pay off a car loan early and ultimately save money.