Buying a car is an expensive affair. It comes with a number of expenses from insurance to warranties. It is an addition to your monthly expenses and makes the budget really tight. Use these 9 simple hacks to save big on your car loan. This might ease things up a little.
1) Round up payments
Round up your payments instead of paying what is suggested by your car loan provider. This way you’ll pay a few dollars extra every month and repay your car loan at the earliest.
Let’s say you got a loan for $30000 with an interest rate of 3.11% for 60 months. This means your monthly payment will be $541. Instead pay $600 every month. This will reduce the number of months for your installments and save you the interest that you would be paying for those extra months. Those few extra dollars won’t hurt your pocket much, in fact it’s a benefit in the long run.
Refinancing is where you get a new loan to finance the earlier one. This will be beneficial only if you are able to lower your interest rate without extending the term of the loan. Otherwise you will end up paying the same loan amount but a higher interest.
That’s right. Make a few sacrifices. Cut down on unnecessary costs- dining in restaurants, junk food, spa days, shopping and the list can go on. Make a monthly budget and stick to it. This will help you save a few extra dollars that you can use to payoff your car loan faster.
4) Don’t let the dealer define your creditworthiness
We know that our credit score determines the interest rate that we get on our loans. A better credit score accounts for a better interest rate. So before you make a deal, take a good look at your credit score. Research the best deals that you can get online and then march to the dealership – confident and armed. This way you have a benefit in the negotiation
5) Do not skip payments.
Never ever skip a payment or two for that matter. It all starts here. Your payments get delayed one month to another and it goes on. This results in an increase in the term of your loan which is exactly the opposite of what you want to do. Your lender may give you the option to skip a payment but it’s a trap, so be careful.
6) Don’t finance your add-ons
The sales people at the dealership are going to offer you a ton of add-ons in the most rosy way ever. But you have to know that most of this is just to make the dealer an additional profit. Don’t finance the add-ons, instead buy them. Decisions that you make at the dealership with regards to all this may be hasty ones and you may just end up increasing the overall cost of your vehicle. Instead, you can decide on all this after you buy your car and purchase it separately instead of financing it. This way you avoid an addition to the loan amount.
7) Two payments a month.
This may seem silly but is has an impact on your car loan payments. Divide your monthly payments into two parts and pay every two weeks. This way you’ll actually be making 13 full payments instead of 12 in a year. Ask your lender is he allows this. Also, if you get paid twice every month, this is your go to option.
8) Additional payments
Making an additional payment whenever you have some money at your disposal is going to save you some loan money. This can be a Christmas bonus, a tax refund or lucky draw maybe? Try and make at least one extra payment in a year.
Or divide this lump sum amount into equal monthly installments over the year and pay along with your usual amount. This too is going to have the same effect as rounding up your payments, i.e. It will cut a few months off. Make sure you ask your loan provider if these pre-payments can be made without any penalties and restriction.
9) Cash Rebate or Zero Interest Loan?
Most of us when given an option between a zero interest loan or cash rebate almost always pick the zero interest loan even without weighing the value of both. There is a good chance that the cash rebate is going to save you more money that the zero interest option. So do your homework, put in the extra effort to calculate what is the result of both offers.
Make use of these tips and you’ll definitely save a very good amount on your car loan. In fact, not only your car loan, you can use these tips for other loans too.
Here is a Beginners Guide On How To Get A Car Loan.
You’ve decided that you want to get your first car. You’ve probably even decided the make and model. Now it’s time for you to actually buy your car and you may be a little confused as to how you’re supposed to go about financing it. Thinking of a car loan? We thought so.
Here is a guide to help you get started.
Step 1) Take a good look at your credit score
Your credit score is going to play a very important role in determining your car loan rate which is the interest you are going to pay on the oan. This means the better your credit score, the lower will be your car loan rate, which means higher savings on the interest and vice-versa.
A credit score is a numerical expression of your creditworthiness. So you want to make sure that you take a few steps to improve this score.
Step 2) Decide on your monthly payments
You will have to jot down a budget for yourself to make sure that you are not overspending. It is important to pick a car that you can afford. Think of the amount that you can shell out every month without hurting your monthly expenses. Use the payment calculator to get an estimate of the monthly payments.
Step 3) Decide the term of your loan
You can spread the loan term to over three, four, five or six years. Most of us are going to opt for a five or six year term as it breaks the payment down to smaller bits making it easier.You might want to give this a good thought as it is going to determine the small variations in the amount you will actually end up paying at the end of your term. Keep this in mind – the longer your payments, the higher the amount of interest you will pay.
Step 4) Don’t exceed your price range
As we mentioned earlier, it is important that you pick a car that you can afford. Most of us pick our car first and then the think of how we are gonna pay for it, right? You’ve probably picked yours too. Try doing it the other way around. Scale out your finance first and then choose a car that fits your price range. This way you won’t have holes in your pockets by the time the loans have faded. You may get overwhelmed while shopping around but keep your budget in mind and you should be sorted.
Step 5) Take a note of the extra expenses
Buying a car involves a lot of extra expenses, some expenses you may be aware of right now, some you won’t. Fuel, maintenance and insurance are a given. Keep a tab of these expenses in your monthly budget. At the first stage itself you may have to shell out a few extra dollars, it can be for some safety accessory or extra feature that you want. This only makes an addition to your budget, so be prepared.
Step 6) Shopping!
Time to shop around and get the best deal out there for your car loan. Check out the interest rates offered by multiple dealerships. Do your research well, it’s going to work for your benefit. You can shop for an auto loan right here.
Step 7) Get a pre-approval
If and when you qualify for your car loan, you will get something know as a “pre-approval”. There are two benefits to this- 1) You can lock in your interest rate 2) You now have negotiating power with the lenders. Pre-approved loan amount should be such that it covers the purchase of your car along with a few additional costs. These loans usually have an expiration date. You have 30 days from the date of approval to present the loan checks to the dealers.
Also, having a bad credit score doesn’t mean that you can’t get a pre-approval. You can get one, only the interest rate may be a little higher.
Step 8) Complete your paperwork
By now you have picked your car and dealer and done your share of negotiation for the price. Its now time to finalize on the paperwork. You must know that it is very likely that the dealer is going to try and trick you into buying extra unnecessary accessories or an extended warranty or something of that sort. You know what this means – increase in your budget which you want to avoid. So play smart and be firm on your decision. There is no turning back after this point.
Step 9) Make your monthly payments
Your paperwork is now complete, you have your car and you will soon have to start paying your installments. Make your payments in full and on time to avoid penalties. Also it’s a good way to ensure that your credit score is not affected (you may want to buy a car again). If you want to finish your loan before time, you can make pre-payments. But check with your bank or the institution giving you a loan if there are any prepayment penalties.
Save Big On Your Next Car Loan Using These 9 Hacks
We hope you have a good experience shopping for your car and car loan. Select the best auto loan quote right here!