Repayments

How to Pay off your Car Loan Early

If you have borrowed money to buy a car, then you may wish that you could pay the loan off early. You may feel that the loan is hanging over you and that you would like to get rid of it or you may want to borrow more money and the loan is holding you back as your credit record is affected. Whatever the reason, it could be possible for you to pay the loan off early.

You will firstly need to look at the terms of the loan to see whether this is possible, If you cannot find them or cannot understand them, then talk to the customer services department and they will be able to let you know. There may be an early redemption fee or an administration fee so you will need to take that into consideration and check if there is one.

It is worth calculating what the remaining cost of your loan is by adding up the remaining interest payments. The compare that with any fees for paying it back early and see which is cheaper. It may be that it is cheaper to keep to the terms and continue paying the loan back as you are. If this is the case then you have to decide whether you think that it is worth paying extra in order to get rid of the debt.
In most cases it will be cheaper to pay the loan back early. It is worth also finding out how much in total you owe and whether you can make small overpayments as you have free money or whether you will need to pay it off in one lump sum. Then you will need to be able to work out a plan on how you will pay it back.

The first thing to consider is whether you have any savings. It is normally well worth using savings to repay debt because the rate of interest of savings tends to be less than the interest rate on loans. It is worth checking though and comparing. You may like to have savings to fall back on, but you will save money by paying off your loan and you could use this to quickly build your savings back up again.

If you do not have savings or do not have enough to cover the full loan amount then you will need to find other ways of getting the money together. There are lots of other options though. You could consider whether you have any items that you no longer need or use. These could be sold to earn some money. There are different ways of doing this such as a table top sale or car boot sale, an online auction, a social media site, local paper or other ways. The way you sell may depend on the type of item that you are selling and how expensive it is. Even if you have items you do not think are worth much, you could find that a sale will generate some extra money which could all add up and go towards paying off the car loan.

If you work, then you could try to earn more money from your job. You could see whether there is any overtime that you can do, ask for a pay rise or you could look for a better paid job. This could be the thing that makes the most significant difference to your income and could really help you to pay off the loan more quickly.

Small things do add up though so it is worth trying other things. If you can cut your spending, for example you will be able to put the money that you save towards paying off the loan. Most of us spend money on many things and there may be ways to buy cheaper items that will save you money or you could cut back on buying unnecessary items and save the money. To do this it could be best to make a note of all of the items that you are buying each month and think about if there is a way that you reduce the cost of each one or whether you could eliminate buying it altogether. This should help you to see where you can cut down and if you do start spending less you could find that you will be able to repay the loan pretty quickly.

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