- March 23, 2022
- Posted by General Electric Credit Union
- 2 read
3 Tips to Pay Off Your Car Loan Fast
Financing a car is a fantastic way to get behind the wheel. As you’re cruising to work or to the store, you may be thinking about those monthly car payments that satisfy your obligation as a borrower. While you can follow the payment schedule laid out by your financial institution, you may also have the option to pay the loan off early. If this opportunity piques your interest, use the three tips below to make it happen.
How to quickly pay off a car loan
1. Pay more than the minimum due
Paying more than the minimum car payment due each month will reduce the amount you pay in interest over the life of a loan. That’s because doing so lowers the principal balance. As well, paying ahead may help you satisfy a loan in its entirety before it reaches the end of its term. Confirm that your financial institution does not charge early payoff fees before committing to this approach.
If you’ve ever missed a loan payment or were unable to pay one in full, it may be worth reviewing your budget – or creating one if you don’t have one already. Doing so helps you spot areas of opportunity to cut back on spending. This can include canceling a rarely used streaming service or downgrading your gym membership to something more basic and affordable.
A budget also helps you see the big picture if you’re interested in making larger payments for the purpose of paying off a loan early. Trimmed costs in certain categories can be redirected toward your loan without significantly tightening your “purse strings.” Even an extra $50 a month can help you work toward this goal.
Tip: Looking for a budgeting tool to help you visualize your debt payoff strategy? Money Management is a free app available to General Electric Credit Union (GECU) members enrolled in Online Banking. If you’re financing a vehicle through GECU, you’re already a member.
3. Consider refinancing
When you initially secured financing for your vehicle, you may not have had as good of a credit score or took a loan with terms that are no longer competitive. Both circumstances are a valid reason to consider refinancing. The lender you decide to work with will pay off your existing loan and transfer your balance to the new one. Then, you’re free to start making payments again. This debt payoff tactic is advantageous because you can secure a lower annual percentage rate (APR).
4. Make biweekly payments
You can make one extra loan payment each year without feeling the burn by submitting biweekly payments instead of monthly. Simply divide the amount you owe per month in half and pay that amount every two weeks. 26 half-payments equal 13 monthly payments a year. Depending on how long your loan term is, this can add up over time.
5. Use your tax refund
Consider setting aside your state and federal tax return for your auto loan. These annual lump-sum payments may make a significant dent in your balance depending on what you get back from the government.
GECU believes in making your auto loan journey a smooth ride. That’s why we offer a wealth of resources to streamline your debt payoff strategy.