It’s important to stay on top of your car loan, so if you want make sure you are firmly in the driving seat, stay tuned for our four key areas to focus on. Making your car loan work for you is about the longer journey, not just the short term goal of buying a car. Here are our recommendations for managing your car loan after your purchase.
Keep your payments up to date
One of the most important tips for effective loan management is to make sure you meet your payment schedule. That means you need to make a payment on or before it’s due every time it’s due, in order to keep your finance provider happy.
Keeping on track with your payments means that you will be progressing towards paying off your loan within the timeframe agreed with the finance company. It also means you will avoid any late payment fees or penalty interest payments.
Furthermore, staying on top of your repayments avoids your credit record being impacted by a bad report about your ability to manage your contract and meet its terms. Keeping your credit record clean is important for any future finance you may want to arrange. Meeting all of your repayment requirements will actually have a positive impact on your credit score.
Review your interest position
It’s worth keeping an eye on the interest rate that you pay on your car loan, and reviewing it in line with current market rates. Your car loan provider will probably have clauses in the terms of your agreement to discourage you from transferring your loan, but there’s no reason you can’t proactively raise the possibility of reviewing rates if the market rate has taken a considerable drop.
It’s particularly worth giving attention to your interest position if you had a poor credit record when you took out your car loan. Some providers charge a higher interest rate to high risk customers who have a bad credit score. Your ability to make payments regularly and on time may have turned around your credit position, so you may now be able to negotiate a drop in rate.
Review your budget – general repayments
During the life of your car loan you may find that your financial position changes. If you are fortunate enough to have an increase in pay or a reduction in costs, and find that you have more money available, it’s worth looking at your car loan.
A small increase in your car loan repayments could dramatically reduce the length of the loan. The shorter your car loan the less interest you will pay – so this could represent a reasonable cost saving as well as the potential to access cash sooner that’s currently tied up in repayments.
Don’t be tempted to put extra cash into day-to-day spending or luxuries. Find out from your provider how much more you can pay on your car loan and put some focus into reducing the size of your debt faster.
Review your budget – lump sum repayments
You may not have an improved day-to-day financial position but instead may have benefited from a lump sum. This could come from inheritance, or a bonus package, and you may be wondering where you could best place it to make a difference.
Again, it’s important to refer to your financial provider and understand if it’s possible for you to pay off an additional lump sum amount of your loan and if so how much and how regularly. This may not be what you plan to do with all your money, but even a small payment will make a difference to the life of your loan.
It’s tempting to set up a car loan and ignore it until the last payment is made. But keeping your car loan on your radar could see you finding smart strategies to pay off your debt even faster and speed you towards the point when you no longer owe money on your car.