The Chesterfield Post

Home
Local News
Sport
POST PERKS
Public Services
Community
- Market
- Charity events
- Clubs & Assocs
- What's On
- Births
- Marriages
- Deaths
Leisure
Property
Jobs
For Sale
- Motors
- Traders

ADVERTISING

Key Reasons To Repay Car Loans Early

Monday 5th October 2020

It makes no sense to pay more money on a car loan when you can follow some easy steps to pay it off early instead.

Roughly 70% of vehicle owners take out loans to purchase their cars, if you are looking to take out a car loan take a look at this car finance checker to ensure you're getting the best deal. Car loans are among the most significant financial burdens most people have.

If you are among this group, it could be that you took out a loan that takes between 60 and 72 months to repay. That represents far too much interest, and as such, we want to offer some advice to help you eliminate this debt sooner and realize real savings on interest along the way.

1. Repay half of your monthly obligation every two weeks.

You might not immediately realise why this is a smart move, but if your lender permits you to do this, you really ought to.

By making this type of payment every two weeks, you actually wind up submitting 26 payments of half the monthly amount every year. That means you will make 13 complete payments instead of just 12.

2. Always round up the amount you pay.

Rather than paying the amount owed each month to the penny, consider rounding up to the next £50 increment to make the repayment process go even faster.

You may not think this will make a huge difference in the amount of interest you ultimately pay, but if you sit down and do the maths, you will see why this makes a lot of sense.

3. Make a large extra payment every year.

This can be done at any time of the year when you find yourself with some extra money available.

Knocking out a big chunk of additional principal each year will hasten the end of your auto debt.

4. Make an additional large payment at some other point during the loan term.

By adding yet another substantial payment that is not formally due, you can trim the amount of interest you pay over the course of the loan and get out from under the obligation that much earlier.

5. Do not miss any payments.

While there are vehicle lenders who permit borrowers to skip payments once or twice annually.

While this is a tempting offer, it is best to decline. The only thing that happens when you skip car payments is that the time you are in debt will be extended, and you will end up paying unnecessary amounts in interest.

6. Consider a refinance loan.

Do your research and negotiate a new loan term, lower payment amount, and new pay-off date.

This should only be done if the savings are substantial and the pay-off date is earlier than it would have been under the original loan. Never agree to refinance if the end result is that you will pay more interest in exchange for a lower monthly payment. It just does not make any financial sense.

Car loans represent a major expense and debt obligation for the majority of borrowers. While there are always lenders out there who are willing to offer long-term financing that may seem like a great deal on first glance, it is important to read the fine print and do the maths. A lower monthly payment is not doing you any favors if you pay far more in interest than you should.