4 Key Tricks to Save Money on your Car Loan

Shopping for a new car can be a fun experience. Once you take that last test drive where you know it’s the one, you sign the paperwork and rush out the door. However, as the months go by and you start paying down on your loan, it can feel neverending. This is why we’re going to share our top four tips to help you save money on your vehicle loan.

Never Opt For Skipping A Payment 

The sneaky trick that all banks use to get you to extend the term of your loan is skip-a-payment. These letters typically show up at the start of Summer and near Christmas time. The give you the option of paying a small amount in a deferment fee and letting your loan extend one additional month. While this may seem like a great way to save some extra green for your Summer vacation or Christmas presents, it’s going to hurt you in the long run.

It’s important to realize that if you opt for every skip-a-payment that the bank offers you on your vehicle loan, they add up. A typical car loan extends between three and five years. If you accept the skip-a-payment option twice every year you have your car loan, it could extend your payments from 6 to 10 months. That’s another half to full year of car payments in the end that you are paying interest on. If you want to save money on your car loan, never opt for a skip-a-payment.

Round Up Your Payments 

Just as you’re told never to just pay the minimum payment on your credit cards, you should never pay just the actual payment amount on your car loan. Take advantage of making numbers simple and round up your payments. If you can afford it, round your payments up to the nearest hundred. So, for example, if you owe $328 every month on your car loan, you should be paying $400 each month. This will help to drastically reduce the number of payments that you owe on your loan, which, in turn, leads to paying less interest entirely. If you can’t afford to round up that high, just round up to the next $50 or $10 mark. Remember that every extra bit that you pay over the monthly amount due will save you money in interest over the life of the loan.

Don’t Shy Away From Refinancing 

While it may seem a bit overwhelming to go through the car loan process again, it can be well worth it for a lower interest rate. If you have greatly improved your credit score over the last few months, you may qualify for a better interest rate on a vehicle loan. Also, it’s very common for banks to offer lower interest rates on car loans from time to time. You can take advantage of these lower interest rates when they become available. It’s important to note that you never should be extending the term of your loan when you refinance for a lower rate. If you currently have two years left on your existing car loan, ensure any new loan you look at only has a term of two years. Extending the life of the loan, even at a lower interest rate, could lead to you paying out more interest over time.

Make Bi-Weekly Payments 

We’ve saved the best tip for last. Instead of paying one monthly payment, you can opt to pay bi-weekly on your car loan. This may not seem like it’s accomplishing much at the surface level, but let’s dig a little deeper. On a traditional car loan, you would make 12 payments a year. So, you would think if you made a payment every two weeks, you would make 24 payments. This is not so. There are 52 weeks in a year, which means you will be making 26 payments each year. With your extra payments, you will not only save yourself in interest through the month, but you will pay off your loan earlier than the initial term agreed upon.

Saving money on your car loan is more achievable than you may think. With the tips above you can slowly chunk away at that large sum that you owe and save yourself some green in the process. It’s important to remember that small choices today turn into money savers in the future.

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