Oh WHAT a WONDERFUL feeling.
To check your car balance.
And see those two little words.
I bought my car brand new and it took me a never-ending 44 months to pay it off. The typical pay off time is 60 months. But I chose to finance my loan for 48 months for a better rate. BUT, with a few small tips I was able to cut 4 months off my loan, thus, paying off my new car in 44 months!
Want some tips to pay off your car loan faster? I've got some for you:
1. Pay more than the minimum. BUT, pay the extra payment seperately.
Paying more than the minimum isn't as easy as writing $500 on the check instead of $400. With car loans, you need to make two seperate payments in order for them to apply it to your principal. On the extra payment, (a seperate check from your regular monthly payment) indicate “Principal Only” on the check so that the lender will not include it to your loan statement next month. In doing so, you will be able to repay your car loan early and pay lower interest throughout the loan period.
2. Avoid late payments.
Pay your auto loan one monthly payment in advance. If you do this, you won't need to worry about your loan due date and you will avoid late payments.
3. Cash out your savings account.
Yeah, this doesn't sound very appealing but hear me out. Interest rates on savings accounts are so low right now, you really aren't making any money off your saving balances. AND you are paying high interest rates on your car loan. So, this is a no brainer.
My semi-professional advice is to keep a "cushion" in your savings accounts (for emergencies), but all the extra money should be used to pay down debt. For instance, the rate on my savings account was 1%, but my car debt interest was at 4.9%. So obviously I would make more money paying off my debt faster than I would keeping it in savings and earning little to no return. (Keep this in mind for credit cards with really high APR's, too!) Basically, the higher the interest rate on your debt, the more attractive repayment versus investment becomes.
Okay, I'm off my financial-soapbox now. Hope everyone has a great (and debt-free) weekend! :)