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Jordan Siemens/Getty Images
4 min read Published 17 August 2022
Written by Kellye Guinan. Written by Personal and Business Finance Contributor

Kellye Guinan is a freelance editor and writer who has more than 5 years experience working in the field of personal finance. She is also a full-time worker at her local library, where she assists the community gain access to information on financial literacy, in addition to other topics.







The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to take control of their finances by providing concise, well-researched, and clear information that breaks down otherwise complex topics into manageable bites.









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As long as that your lender doesn't apply a prepayment penalty and you pay off your loan faster, it is a great method to save. This means you pay less interest -- and when you're finished, you'll have a few extra hundred dollars left in your budget every month. However, getting there is challenging. There are some strategies that you can employ to pay your loan off more quickly. But, even the best option, it could put you in a worse financial situation if not conscious of how you approach your finances. 6 ways to pay off your car loan quicker There's no specific way to pay off your car loan prior to the timetable. In reality, it makes sense to vary your strategy. When you've got an idea of what you want to do, you can take advantage of a few strategies to get rid of your vehicle loan more quickly. 1. Refinance with a new lender is a great option to pay off your loan more quickly. If you choose a shorter loan duration, you might be able to maintain the same monthly payment -- if you can secure a lower interest rate. Even if you do not pay extra or round your payments up to make them more frequent, you'll be able to pay off your car loan more quickly. 2. Pay biweekly, even though it might seem like a lot however, making payments twice a month rather than once will get you closer to the finish line. It will also help save on . It's because interest will have less time to accrue before you make payments -- and also because you'll always lower the total loan balance. It helps move you toward an earlier payoff date, without drastically increasing the amount that you put toward your loan every month. 3. Make your payments round to the nearest hundred Similarly, rounding up your payments can have a slight impact on the month-to-month basis, but it will make a huge difference overall. By rounding up to the nearest hundred or, at a minimum, the closest total number, you can slowly reduce the principal of your car loan. Also, you will be ahead of schedule and stay ahead of the interest rate and allow you to make a smooth transition into a faster repayment. 4. Avoid unnecessary extras If you want to opt out of gaps insurance or an extended warranty, or a service contract to your loan, contact your provider and cancel the add-ons. You should be able to receive a prorated reimbursement for the remaining amount, while also lowering your monthly payment. However, instead of putting that cash back into your bank account instead, put it into the loan. In this way, you'll be liable less overall and benefit from the benefit of a lump-sum payment. 5. Pay a larger amount of additional payments Tax returns, bonuses and other large lumps of cash could go towards your car loan. If you can cut the amount of your principal by a couple of hundred dollars, it's likely worth doing. As with rounding your payments, and making payments biweekly to avoid interest from accumulating. As your loan balance decreases, more of your payment will go toward principal, leading to an early payoff. 6. Make sure you pay each month, even when you're ahead of your schedule, you should still pay your loan each month. This prevents interest from accruing which means that more of your principal is paid and thereby reducing the amount of amount of interest you have to pay. Making regular payments even in the absence of a need can result in paying off your car loan in a timely manner. When not to make a payment on your car loan in time. Making the decision to pay off your vehicle loan early means an extra few hundred dollars that you can put in your pocket each month. In some instances, you could negatively impact your finances more than help and so not always be the best move. Do not pay your loan early If there is a penalty for prepayment. A essentially punishes you for not paying your loan in full or paying the full amount of your loan in advance. It's the lender's effort to make up with the amount of interest that you could have incurred if you had stayed on schedule. If there's a prepayment penalty, make sure it doesn't cost more than you'd be paying in interest. The loan uses precomputed interest . front-loads the interest you pay every year, so you pay for the month that counts for a greater share than the last month. If you are able to make payments on your loan in advance, you will not substantially reduce the cost of your vehicle loan. In this scenario, it may be better to stick to the loan schedule. There isn't a lot of debt. While it may sound counterintuitive, your credit score is calculated based on the type of debt you've got and the duration of the debts. Since automobile loans are long-term loans, making consistent payments for years will help to keep your credit score up. A caveat is that paying off your loan may reduce your credit utilization ratio, which accounts for around thirty percent of credit scoring. If you have debts that aren't paid off and an excessive proportion of debt to income (DTI) eliminating one of them will improve your score. Strategies to reduce the cost of your car loan from refinancing your loan, there are two methods to cut down your monthly payments: defer them or request the loan modification. Deferment lets you skip a payment if you are having financial issues that are short-term. The lender may provide up to three months of deferment in order to help you get through the. However, deferment will only move the payments until the end of your loan and you'll need to pay them back in the future. Additionally, you will be accountable for interest, so in the end, it is more expensive. Lenders may be less willing to alter the terms of your loan however it wouldn't harm to inquire. Much like refinancing, will alter the conditions of your loan by either extending your duration or lowering your rate. If you are able to get an extension to your loan and reduce your monthly payment without having to apply with a new lender. The next steps necessarily be the best option to make the payment on your car loan early. If you're facing penalties for prepayment or a risk of a impact on your credit score, the savings won't be worth it. But if you want to pay off your debt, eliminating car payments is one of the quickest ways to make room in your budget. Refinancing or paying extra monthly payments are the best way to pay off your car loan more quickly. Even if you only pay an extra few dollars per month, you'll decrease your debt and cut a few months out of your loan. Find out more


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Written by a Personal and Business finance Contributor

Kellye Guinan is a freelance editor and writer with more than five years ' experience within personal finance. She is also a full-time librarian at the local library where she helps her community access information about financial literacy, among other topics.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are enthusiastic about helping readers gain confidence to manage their finances with precise, well-researched and informative facts that break down complicated topics into bite-sized pieces.






Auto loans editor




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