Have you had your car loan for 12 months or more? If so it could be time to review your options and perform a health-check. Here are five simple steps to getting the most from your car loan.
1. Increase the value of your payments
If your budget changes or your financial position improves, you may be able to increase the amount you’re paying. Check with your provider and find out if it’s possible to pay more and reduce the life of your loan.
2. Increase the frequency of your payments
If you receive your pay weekly or fortnightly, you might find it easier to pay off your loan in the same way. Splitting your monthly payment into two and turning it into a fortnightly payment instead allows you to add in an additional payment every year.
3. Make additional payments
If you enjoy a windfall or have extra cash on your hands, you could choose to make an additional payment. You could make a single one off payment, or opt to make an extra payment on an annual basis. Check the terms of your loan first for early repayment charges. It’s also important to make sure that if you have different debts you prioritise paying off the debt with the highest interest rate first.
4. Avoid skipping payments
Most car loan providers offer the opportunity to take a break from repaying your loan. If you’re struggling to meet your payments then always contact your provider and let them know. Missing a payment could impact your credit rating and cause issues with future finance applications. Skipping payments on your loan delays the date that it is paid off in full and will add additional interest costs as well. If you’re considering diverting your payments elsewhere it’s wise to be aware of the full cost before you make any decisions.
5. Consider refinancing
If your circumstances have changed you might be ready to refinance your car loan. It’s wise to review your position every 12 months to be sure you’re getting the best value from your situation. Refinancing could allow you to: reduce your interest rates; increase your repayment levels; pay off a lump sum and reduce the loan value; renegotiate repayment restrictions and increase your payment flexibility. You can try out our car loan calculator to get an estimate of your repayments. If you have a car loan, performing an annual health-check is a great way to be sure you’re getting the most from your money.
