Getting a car loan is usually a necessary part of purchasing a new or pre-owned vehicle. Driving is fun, but making car loan payments isn't. However, by changing your car loan rate or doing some loan amortization, it's possible to pay off car loans faster than originally planned. By following the steps below, you'll be able to completely own and enjoy your new car in a minimal amount of time.
You can't pay off a new car if you don't have the money available to do so. The first step in paying off your new car debt is to make sure you have sufficient funds. Prioritize your spending to see how much extra money you can afford to pay per month.
Speak to your lender about changing your car loan rate in order to pay more per month over a shorter period of time. The advantage of changing your car loan rate is that you can often negotiate a lower interest rate if you pay the loan off more quickly. Not only will you own your new car sooner, but you'll save money doing so.
Loan amortization means that you pay more money per month than is required. For example, if you usually make monthly payments of $500, you're free to pay $1000 instead. The extra money will be applied to your account, and you'll end up paying off your loan faster. The difference between amortizing your loan and changing your car loan rate is that amortizing your loan doesn't make higher payments a requirement, only an option. You're free to pay $500 the next month if your finances don't allow you to pay more, whereas changing your car loan rate would give you a new, higher minimum payment. The disadvantage is that your interest rate will remain constant, though you'll still end up paying less total interest if you pay your loan off faster.
Both changing your car loan rate and amortizing your loan will aid you in paying off your car loan faster. You can choose one or the other or even do both. Make sure you take the advantages and disadvantages of both into account before deciding what to do. Changing your car loan rate may result in a lower interest rate, but you'll also have to commit to paying more every month. Amortization won't give you the advantage of a lower interest rate, but it offers more financial flexibility should something unexpected happen.
By changing your car loan rate or amortizing your loan according to your financial ability, you'll be able to fully own your car faster.
