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.