Enjoy the benefits of paying your car off early
Having any kind of debt sucks, and a loan for your vehicle is no exception. The reason many people are perpetually broke is because they take on too many monthly payments. It is possible to pay off your car loan early if you follow some simple strategies. The key to success with paying off a vehicle (or any debt for that matter) is to do it consistently, a bit each month. Even though it will take a while, your debt will get smaller and smaller.
If you have not yet financed your car or truck, let me try to talk you out of it. If you have your heart set on that new ride and I can't change your mind, follow these tips to pay off your car loan early.
1. Make sure you can make extra payments on your loan
You need to be able to make extra payments on your car loan whenever you like, with no penalties. If you can't do this, walk away. There is no reason a finance company should hold you hostage and not permit you to free yourself from the bondage of debt more quickly.
2. Take the longest amortization that you can
This step applies only if you do not have 0% interest on your loan. Some car companies finance their own vehicles and will offer 0%. This seems counterintuitive to helping you pay of your car loan early, but it doesn't have to be. Ask what the payments would be if you financed the car over 3, 4, and 5 years. Decide what you can afford to pay at the most and then finance it for as long as they will let you. You then need to pay the difference between your monthly payment and what you decided you can afford each month. The extra money you are paying is interest free this way allowing you to pay down the loan faster than if you had taken the shorter amortization and paid interest on the larger monthly payment.
3. Skip the insurance
This tip is for those who have not yet bought their car. When financing a new or used car, the dealership will try to sell you all kinds of insurance. Disability insurance, unemployment insurance, extra warranty etc. My advice is just not to bother. If you are injured, and can't carry the payments for a couple of months until you're back on your feet or until you can sell the thing, then the truth is you can't really afford a new car.
Not to mention the dealerships make massive profits on this type of coverage. It's also a huge hassle to actually get covered when you need it even if you have bought the insurance fair and square. Nothing is as easy as it seems. They will do everything in their power to not pay you.
Stick with this. Pay even more each month if you can afford it. Even ten bucks, it all ads up. You will find this frustrating for a while when the loan amount doesn't seem to be going down but be patient. After a year you will have made a serious dent in the cost of your new car. Stick with it and you will have the car paid off much sooner than you ever thought.
If you already have your vehicle and want to enjoy the benefits of paying your car off early, you will need to find extra money and make extra payments each month as well. If your finance company will not allow this you need to transfer your loan to somewhere that will. Even if it means taking a slightly higher interest rate. It will pay off in the end when you make your extra payments.
Be consistent. Mark a day on your calendar each month when you will take all of the extra money you have put away and make an extra payment to your car loan. Do this every single month and you will see results.
If you can, take a side job in the evenings or start a small hauling service to make a few extra bucks to help pay off your car loan early. Every little bit counts when you're battling debt.
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