![]() ![]() Switch to Biweekly Paymentsīiweekly payments simply make more sense for the average worker, who gets paid biweekly. Either way, you skip the worst of the interest payments and pay off your loan faster. ![]() Scaling back could mean paying additional payments of $50 or $100 each month or making the minimum payment. You can make double car payments for the first year of your loan, then scale it back. The upshot is that you can skip that initial phase, where most of your monthly payments go to interest, by paying down your balance quickly in the beginning. It’s called “simple interest amortization,” even though there’s nothing simple about it. Over your loan term, more and more of each car loan payment goes toward paying down your principal balance. Front-Load Your Extra PaymentsĪt the beginning of a loan, most of your monthly car payments go toward interest rather than principal. That helps you skip the early high-interest phase of your loan term. The extra money goes straight toward your principal balance and moves you further along the amortization schedule. For example, if your regular monthly payment amount is $350, set up automated payments of $400 or $500 - whatever you want to put toward knocking it out quickly. Automate Higher Monthly PaymentsĪutomating good financial habits and behaviors is always a good idea.Īnd you can use it to pay off your car loan early by setting up higher automated payments. And all these tactics work well in helping you knock out your car loan quickly. Once you decide to pay off your auto loan early, it’s just a matter of determining the best quick-loan payoff method for you. And once you’re debt-free, you can put more money in your emergency fund and retirement accounts. It also lets you put more money toward student loans and high-interest debt like credit cards and personal loans. Paying off your car loan early can help you lower your car insurance payment since you no longer have to carry full coverage. But you can pay off your auto loan early rather than suffering through it for years on end. Nobody likes the weight of debt hanging around their neck.Įven when you can afford regular payments without biting your fingernails each month, car loans still likely make up your second-largest bill each month after your mortgage.īut not everyone can afford to buy a car with cash, and unless you live downtown, you probably need a working car. ![]()
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