So you’re buying a new car and you need to get a loan? That doesn’t mean you have to be in debt for the next five years. If you’re planning on conquering your car loan quickly, take a look at these five tips to paying it off fast.
1. Make your budget realistic, but tough
Setting a budget for a car loan can be tricky. You need to push yourself to pay as much as possible. But of course, at the same time, it’s important to make sure you can make your repayments.
Start by working out your budget in detail and understanding what’s going in and out of your account every month. Then, take what’s left, subtract the cost of running your car, and try having a play with a repayment calculator to see how quickly you could pay off your loan.
2. Be prepared to make compromises
The easiest way to bring down the cost of borrowing is to plan to borrow less. Take a look at the car you want to buy and make sure you’ve chosen the right model for your budget. If you’re finding it’s a struggle to afford, it might be worth asking an expert(?) if there’s a smarter way to spend your money.
3. Be aware of the cost of borrowing
The less money you pay in fees, charges and interest; the more you can put into paying off your car loan. Before you sign up make sure you’re aware of every cost. Take some time to review what’s available in the market and if necessary do some negotiation to get the best deal.
4. Don’t miss a payment
Your car loan provider may offer you the chance to take a payment break. Missed payments increase interest costs and lengthen the life of your loan (even if they’re approved up front). If you want to pay off your car loan fast: make every payment count.
5. Review regularly
Even if you’re paying your car loan off fast, it may be possible to do it faster. Keeping costs down will make it possible to do more to chip away at the principle. An annual review of your car loan position will allow you to check that you’ve got the best deal on the market. Remember to factor in the cost of switching before you make any changes.