I still remember when Former Treasury Secretary Lawrence Summers had an interview on Bloomberg one afternoon. He was being interviewed by David Westin and asked to give his take on inflation and how it will affect us. Mr. Summers said that inflation will not be transitory and could linger around for some time. I listened to other economist as they said that the economy will be fine, and the stock market will correct but 2022 will be another great year for our economy. Around that time gas was $2.78 cents and currently gas averages around $4.76 nationally. There was a report that gas in California was even $7.90 a gallon. Used cars are now worth more and not to mention interest rates are starting to go up. Some of us still have a car loan and are trying to pay the car down faster. Paying our car loan down can have some benefits and help us keep more money in our pockets on the back end. Here are some effective ways below!
1.Create a budget and stick to it
One of the best things we can do is create a budget and stick to it. There are a few different ways to approach creating a budget. We can use the traditional pen-and-paper method, or there are many great budgeting apps available that can make the process easier. Some examples of apps we can use are Mint, YNAB, and EveryDollar.
Mint is a free budgeting app that allows us to connect all our financial accounts in one digital space, so we can get a high-level overview of our financial health. By, using Mint, we can set up bill payment reminders, track investments, and access our TransUnion credit score. Mint is one of the most used personal finance apps and has over 30 million users.
YNAB stands for “You need a budget” and is another app that is used for creating a budget. This app helps us manage our money by encouraging us to allocate every dollar of our income to expected expenses or savings for the current month. YNAB offers a range of features to help us stay on track with our finances, including goal setting, budget tracking, and more! YNAB has a free trial, but after the trial ends there’s a monthly charge of $14.99.
EveryDollar is a zero-based budgeting app created by Ramsey Solutions that can help you plan for monthly expenses and track your spending. The EveryDollar app offers a free version and a “Plus” version that costs $129 per year. If you are interested in a budget creating app, give these three a look and chose whichever is right for you! Once we have a budget in place, it’s important to stick to it as closely as possible.
2. Make bi-weekly payments instead of monthly payments
Most of us budget our monthly income and make payments on our car loan accordingly. However, we can save money in the long run by making bi-weekly payments instead of monthly payments. This may seem like a small change, but it can have a big impact on the amount of interest we pay over the life of the loan. Making bi-weekly payments means that we will make 26 payments over the course of a year, rather than 24. This may not seem like much, but it can add up to significant savings in interest. For example, if we have a $25,000 car loan with an interest rate of 5% and finance for 5 years, our monthly payment would be around $440. If we switch to bi-weekly payments, we will end up paying close to $470 per payment, but we would make two extra payments over the course of the year. This would save us nearly $600 in interest over the life of the loan!
3. Apply any extra money you have towards your car loan principal.
If we budget carefully and find that we have extra money each month, we may wonder whether it makes sense to apply that money towards our car loan principal in order to pay down the loan faster. The answer depends on a few factors, including the interest rate on our loan and the length of time remaining on the loan. If we have a high interest rate and/or a long time remaining on the loan, it may make sense to apply extra payments towards the principal to reduce the amount of interest we pay over the life of the loan. To calculate how much extra money you should pay each month, first determine what your car loan’s monthly interest rate is. Then, divide that by 12 to get the amount of interest you’re paying each month. Add this amount to your minimum car loan payment, and make sure to pay this new total each month. The extra money you’re paying will go towards the principal and will help you pay off your car loan faster.
4. Refinance your car loan to get a lower interest rate.
Refinancing our loan to get a lower interest rate can help pay down our car loan faster. By refinancing, we’ll be able to pay less interest on our loan overall, which means more of our monthly payment will go towards the principal of the loan. This can help us pay off our loan faster and save money in the long run. There are a few things to keep in mind when considering refinancing our car loan. First, we’ll need to have good credit to qualify for a lower interest rate. Finally, we’ll need to compare rates from multiple lenders to get the best deal.
5. Prepay your car loan if you can afford to do so.
Prepaying our car loan can help us pay down the loan faster. When we make regular payments on our loan, some of the payment goes towards the principal of the loan, and some goes towards the interest. By prepaying our loan, we can pay more towards the principal, which will reduce the amount of interest we pay over the life of the loan. There are a few things you’ll need to consider. First, check with your lender to see if there are any pre-payment penalties. You’ll also want to make sure that you have the funds available to cover the remaining balance of the loan. Once we’ve considered these factors, we can prepay our car loan by making a lump-sum payment to our lender. This will help us save on interest and pay off our loan more quickly.
6. Consider a shorter car loan term.
If we’re looking to pay down our car loan faster, another option is to consider a shorter loan term. By opting for a shorter loan term, we’ll increase our monthly payments but pay off the loan principal faster. This can be a good option if you have the financial means to make the higher payments. Keep in mind, however, that you may pay more in interest over the life of the loan with a shorter-term loan. So, be sure to weigh your options and decide what’s best for your financial situation!
7. Keeping our car well-maintained
By avoiding costly repairs and regular maintenance, you can save money that can be applied to your loan balance. In addition, maintaining your vehicle can help extend its life, which can also save you money in the long run. A well-maintained car is likely to have a higher resale value. Have the car serviced regularly. This will help to identify any potential issues before they become serious problems. Regular servicing can help to extend the life of our car.
8. Drive less to save on gas and wear and tear on your car.
Every time we hit the road, we’re not only using up gas but also causing wear and tear on our vehicle. Over time, this can add up to significant savings that can be applied directly to your loan balance. So, if we can find ways to cut down on our driving, we’ll be well on your way to paying off your loan faster. There are a few simple ways to reduce the amount of driving we do. First, try to consolidate trips whenever possible. If you need to run a few errands, see if you can do them all at once instead of making separate trips. Second, try to carpool or use public transportation when possible. This can not only save you money on gas, but it can also reduce the amount of wear and tear on your car. Finally, try to walk or ride your bike whenever possible. Not only is this good for the environment, but it can also help you save money on gas and reduce the amount of wear and tear on your car.
9. Carpool or use public transportation when possible.
Carpooling or using public transportation when possible is a great way to save money and pay down our car loan faster. Carpooling can help us save on gas, parking, and tolls, and it is also a great way to meet new people and reduce our carbon footprint. Public transportation is another great option for saving money and paying down your car loan faster. Taking the bus or train can help you save on gas and parking.
10. Sell items you no longer need to raise extra money for your car loan.
Another way to pay down our car loan faster is to sell items we no longer need. This can help by raising extra money for our car loan, which can then be used to pay off the loan more quickly. This is a great option if we have items that we no longer need or want and are looking for a way to get rid of them. It is also a good way to raise extra money if we’re struggling to make our car loan payments. If we’re able to sell items we no longer need, it is a good idea to do so and use the extra money to pay down our car loan as soon as possible. This can help us save money on interest and pay off our loan more quickly.
11. Get a part-time job to bring in additional income.
There are several ways that getting a part-time job can help us pay down our car loan faster. First, the additional income can help us make larger payments on our loan, which will reduce the overall amount of interest we pay. Also, if we get a job that pays hourly, we can work extra hours and use the additional income to make a lump sum payment on our loan. This will reduce the overall balance of our loan and can help us save money on interest.
12. Cut back on expenses so you can apply more money towards your car loan.
Another way we can pay down a car loan faster is to cut back on our expenses. By applying more money to our monthly payments, we can reduce the amount of interest we accrue and pay off the loan sooner. Of course, this isn’t always easy, but if we can make some sacrifices and cut back on our spending, we can apply that extra money to our car loan and get out of debt sooner. There are several ways to cut back on our expenses. One way is to reduce our monthly expenses by looking for ways to save money on our daily spending. For example, we can cook at home more often instead of eating out, or we can carpool with friends or colleagues to save on gas. Another way to cut back on expenses is to reduce our long-term expenses. So, look at your budget and see where you can cut back. You may be surprised how much money you can save –and how quickly you can pay off your car loan.
13. Make payments electronically to avoid late fees
Making payments electronically to avoid late fees is a way we can pay down a car loan faster. This can help because by avoiding late fees, you can save money that can be applied to the loan balance. Additionally, making payments on time can help improve your credit score, which can save you money in the long run as well. When we make a payment on time, it shows that we’re responsible and can be trusted to make future payments on time also. This can give us negotiating power when it comes time to renew our loan or get a new one if needed. When making payments electronically, be sure to schedule the payment for the day after your regular payday. This will ensure that the payment is received on time and avoid any late fees. Additionally, electronic payments can often be made directly from your bank account, which can help avoid any additional fees.
Bonus tips:
Pay more than the minimum payment each month.
Another way we can pay down our car loan faster is to simply pay more than the minimum each month. By doing so, we can make a dent in our overall balance and reduce the amount of interest we’ll accrue over time. Of course, this will require some financial discipline on our part – but it can be a great way to get ahead on our loan.
So why does paying more than the minimum help? By decreasing our balance, we’re also decreasing the amount of interest that accrues each month. The less interest we have to pay, the more money we can put towards the principal of our loan – and that means we can pay it off faster.
Of course, we’ll need to make sure that we can afford the higher payments before we make the commitment. However, if we’re able to pay more than the minimum each month, it can be a great way to get ahead on our car loan.
Have an accountability partner to help you stay on track with paying down your car loan
If you’re looking for accountability and support in paying down your car loan, having an accountability partner can be a great way to stay on track. Having someone to check in with regularly can help you stay motivated and focused on your goals. Plus, it’s always helpful to have someone to talk to about your finances and any challenges you’re facing. If you’re not sure where to start, try reaching out to a friend or family member who you trust and who can offer support and encouragement. accountability partners can be a great way to stay on track with your finances and reach your goals!
Conclusion:
Thank you for reading! We hope that by trying out some of the strategies we mentioned, you will be on your way to becoming car loan debt-free in no time. If you have any questions or want more information, please feel free to reach out to us. We would be happy to help! In the meantime, please share with us any tips or strategies you used to pay down your car loan faster. Did you refinance? Cut back on expenses? Drive less? Let us know in the comments below! Check out my other blog Simple Tips for Young Professionals to Pay Down Credit Card Debt Faster.