With the cost of living rising and interest rates moving higher, getting on top of your household’s expenses and debts is more important than ever. For most people, a car loan is often the second largest household expense and it’s one that can cost a lot more these days with the high price of new cars. Fortunately, there are several things you can do to speed up the process of paying down your car loan so you can finally own your vehicle outright.
Understand your car loan
Before you begin strategising, get a clear picture of your current loan. Know how much is outstanding, your interest rate and whether there are any penalties for extra repayments or an early payout. Talk to a Broker Kit broker if you need help with this.
Round up your repayments
It’s common for loan repayments to land on an odd number. Instead of sticking to this, consider rounding up to the nearest even number. For instance, if your repayment is $477 a month, why not round it up to $500? This simple strategy could help shave off months or even years from your loan term.
Increase your repayment frequency
Rather than sticking to the standard monthly repayments, consider switching to fortnightly. As there are 26 fortnights in a year, you’ll end up making the equivalent of an extra month’s repayment each year. Over time, this can significantly reduce the life of your loan and the interest you pay. Remember to check with your lender or broker, as not all loans allow for extra repayments or changes in repayment frequency.
Lump sum repayments
If you come across some unexpected cash – a tax return, work bonus, or selling unwanted items – consider making a lump sum repayment on your car loan. Not only does this reduce your loan balance and the interest you’ll pay, it can also provide a buffer in case you miss a future repayment.
Earn income from your car
In this era of the sharing economy, your car can be more than just a mode of transport; it can be a source of income. Consider renting out your car when it’s not in use or becoming part of a ridesharing service. The additional income can go straight towards your car loan repayments.
Refinance your car loan
If your financial situation has improved since taking out your car loan, you might be eligible for a more competitive interest rate. Refinancing to a lower rate while maintaining your current repayment amount can help you pay off your loan faster. But remember to check if refinancing will lengthen your loan term or come with additional fees.
If you are looking to refinance your car loan, chat with your broker at Broker Kit. Your Broker Kit finance broker will help you determine your borrowing power, sift through hundreds of loans to find you the most suitable options and guide you through the application process.