When you are about to make a major purchase of life ‘buying a new car’, rushing into getting a car loan without understanding the basic terms and interest is a common thing. These monthly payments towards the car loan can take out a big portion of your monthly budget for many years to come.
Luckily, there are several ways to save hundreds of bucks on car loans. Below are some smart tricks that can help you cut the costs of an auto loan to pay it early.
1. Understand your Credit Scores
Terms of a loan are usually based on the credit scores of a borrower. If the credit scores are perfect, the lender offers the lowest best interest rate and easy terms. If someone has bad credit scores then he will get a higher interest rate just because of the questionable credit history. That is the reason, understanding your credit score can help you shop for auto loans wisely. If you have a poor credit history or some other problems with your credit, then you should be waiting for a good time. Just a tiny improvement in interest rate can help you save lots of bucks.
2. Don’t Borrow Too Little
If you need a couple of thousand dollars to buy your favorite car, then don’t apply for a car loan as there are many other financing options to meet minor financial needs. Instead, you should be looking for a fast loan because they are easier to apply and come with fewer terms and conditions. Small loans can be paid quickly and can also save many dollars in terms of lower interest rates. However, one should shop around to find better deals to save more.
3. Make Additional Payments and try to Pay More Than Minimum
If you are blessed with an unexpected sum of money in form of a bonus from the employer, tax return or a prize, try to make an extra payment towards the car loan to pay it as soon as possible. Also, try to pay more than the minimum. In this way, you will need to pay a lesser interest rate that can help you save a lot on auto loans. Review your monthly budget plan and find out the ways to make more payments than the minimum to get rid of the loan quickly. If you have a plan to pay the car loan off early by making additional payments or by paying more than minimum, be sure to discuss with the lender about any penalties or conditions that apply for early payoff.
4. Cut Unnecessary Costs
Cutting the unnecessary costs down is one of the best ways to save on your car loan. Find out the things you can cut down and send that money towards car loan payments. For this purpose, you can skip a dinner outdoor, a high-end entertainment plan, ordering meals from restaurants and a spa session, etc. Moreover, you should make a monthly budget plan and stick with that to avoid any unnecessary spending throughout the month.
5. Make Payments on Time
The skip-a-payment option sounds tempting during the holiday season to get some money for gifts, but it can end up with higher interest amounts. Most of the lenders use this option to make more money instead of giving relief to the borrower. That is the reason, you should make payments on time without skipping a single one. Payment scheduling is a good idea to prevent late and skipped payments.
Refinancing a loan is only beneficial if you got a new lower monthly payment and a sooner loan pay-off date. If the lender offers a lower monthly payment but a lengthen pay off date, it can add up more towards the car loan instead of saving. A sensible loan refinancing not only lowers the monthly payment, but it reduces the amount of interest as well to help you pay your car loan quickly.
7. Pay Additional Costs with cash
When applying for a car loan, try not to finance the miscellaneous expenses associated with the car purchase. Costs like sales tax, documentation, registration fees, and extended warranties, etc. can add up a lot in the car loan and can end up with huge interests amount. In order to save on a car loan, you should pay all these costs with cash. Moneylenders and dealers are happy to roll such costs into your financing because it helps them make more money in terms of more interest money. So, try to pay for these costs by yourself to save hundreds of bucks on the car loan.
Article Submitted By Community Writer