5 Tips for Paying Off Your Car Loan Faster

Financially speaking, few things feel better than paying off a loan early. It’s a nice feeling to escape that monthly loan payment once and for all. The question is: What can you do to pay off your car loan faster? Here are 5 tips to keep in mind.

1. Consider refinancing your vehicle loan

Refinancing makes sense if your current loan has a high interest rate or other monthly fees. You could end up with better terms and a lower payment. This is especially true if your credit score has improved since you started paying off the loan. And remember, your goal should be to pay off the loan faster, so ideally, don’t refinance for a longer period than your current loan. Instead, look for a shorter term and a lower interest rate.

2. Make a large one-time payment

If extra money comes your way from a job bonus, tax return or whatever, consider making a large payment toward your auto loan. Specify to your lender that you want the extra payment to be applied toward the principal, which will also reduce the interest you pay moving forward.

3. Review and remove unneeded add-ons

Your original loan contract may include add-ons that are slowing your progress toward being payment-free. Here are some examples:

• Service contracts
• Extended warranties
• Tire and wheel warranties
• Guaranteed asset protection (GAP) waivers

Some of these add-ons are useful, but others could be removed. Contact your lender to discuss the add-ons for your loan and decide if any of them can and should be removed. You might even get a partial refund or a credit if you remove them. But again, first make sure you won’t need those add-ons.

4. Half a loan payment every two weeks = one extra monthly payment per year

If you make half a loan payment every two weeks, instead of one full payment once a month, you’ll be making one extra payment a year. Don’t believe us? Here’s the math, assuming a $500 monthly payment:

This payment strategy also lowers your interest payments over the life of the loan because you’ll be decreasing the remaining balance faster.

5. Round up to the nearest $50

Another way to pay off your car loan faster is to round up your payment to the nearest $50. For example, if your loan payment is $360 per month, pay $400 instead. After a year, you would have paid an extra $480.

Bonus tip: If your budget allows, you can combine rounding up to the nearest $50 AND making half a payment every two weeks. By combining these strategies, you’ll definitely pay off your loan faster.