If you have borrowed money to pay for a Car Loan, then you may find that the repayments seem to go one and on. You may wish that you could pay it back early, perhaps you have the money available or you would like to make overpayments so that you can finish paying it back earlier. It can be possible to do this with many car loans, but you will need to know-how.
Benefits of paying off your car loan early
To start with you need to investigate whether it is possible to pay the loan back early. It is likely that you will be able to do this but you will need to call the lender and find out. You will also need to check whether there is a fee for paying back early, usually called an early redemption fee. You will also need to check if you can make small overpayments or whether you need to continue to make the required repayments and just pay off the loan early with a lump sum once you have enough to do so. It is important to have a good understanding of how things work and the costs before you start. Once you know the cost, you can calculate whether it will be worth paying it off early. Calculate how much it will cost with your current agreement. Then work out how much interest you will save if you pay it back early and whether that is more or less than the early redemption charge. Then you will know whether it is even worth paying it off early with regards to the cost. Of course, there may be other reasons for paying it back early too, such as getting rid of the burden of a loan and perhaps wanting to clear debts to improve your credit rating. In these cases, the cost may not be that important.
What to consider before paying off your car loan early
Once you have decided that it is a good idea to pay back your loan early, you will need a strategy. If you have the money available, then you will just need to contact the lender to ask how you send it to them. However, if you do not, then you need to work on a plan so that you can achieve your goal. You may have an extra bit of money each month and if you do, you could ask if you can make a bigger monthly repayment until the debt is paid off. However, many people who have the goal of paying off a loan early, actually have not got a plan on where they will find the extra money necessary.
It is wise to start by writing down what you would like to achieve. This could be a date when you want the loan paid off, how much extra you want to pay off each month, or something like this. Also, write why you want to do this and what the advantages will be of achieving this. Put this somewhere where you will read it each day (and make sure that you do!) and you will be able to remain focussed on your goal and be more motivated to do what you need to do each day in order to achieve it.
How to pay off your car loan early
You may then need to find ways of having more money available to pay off the loan. This could mean that you will increase your income. You may be able to change jobs, ask for a rise, do overtime, do a second job, sell things, start a business or try other things to help you to have more money available to pay your loan off. You will also benefit from seeing if you can reduce your spending. You could compare utilities, finance, and suppliers and see if you can switch to cheaper ones, buy cheaper brands, shop in cheaper places, and buy fewer luxuries so that you have more money available to do this. This is not always easy, but once you get into the habit of thinking hard before you buy anything about whether you really need it and if you can find it cheaper elsewhere then it will be a lot easier. If you keep focussing on what you are achieving by working harder and spending less, rather than what you are missing out on then this should help as well.