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How to pay off a car loan faster Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive financial calculators and tools as well as publishing accurate and original content. This allows users to conduct research and compare data for free and help you make sound financial decisions. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this website come from companies that pay us. This compensation could affect how and when products are featured on this site, including, for example, the order in which they may be listed within the categories of listing in the event that they are not permitted by law for our mortgage home equity, mortgage and other home lending products. This compensation, however, does not influence the information we provide, or the reviews appear on this website. We do not include the universe of companies or financial offerings that could be accessible to you.



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4 min read . Published August 17, 2022
Authored by Kellye Guinan. Written by personal and Business Finance contributor

Kellye Guinan is a freelance editor and writer with more than five years of experience in personal finance. She's also a full-time worker at her local library where she helps people in her community get information on financial literacy, among other topics.







Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to take control of their finances with precise, well-researched and well-written facts that break down complex topics into manageable bites.









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Provided your lender doesn't have a penalty for prepayment and you pay off your loan faster, it is an excellent method to save. It will result in less interest -- and when you're finished, you'll have an extra few hundred dollars in your budget each month. However, getting there is difficult. There are some strategies you can use to pay your loan off more quickly. Even when you are able to, it could make you in a much worse financial situation if not mindful about your approach. 6 strategies to get rid of your car loan faster There is no one path to paying off your car loan prior to the timetable. In reality, it makes sense to vary your approach. When you've got an idea of how, you can benefit from a variety of ways to make payments on your vehicle loan more quickly. 1. Refinancing with a new lender can be an easy way to pay off your loan more quickly. If you opt for an a shorter loan period, you may have the option of keeping the same monthly payment -- provided you score a lower interest rate. Even if you do not make additional payments or round up your payments in the first place, you'll finish the car loan more quickly. 2. Make biweekly payments Although it may not seem like much however, making payments twice a month rather than once will get you closer to the finish line quicker. It also helps save on . The reason is that interest will be less likely to accumulate before making payments -- and because you'll be able to consistently reduce the total loan balance. It helps move you toward an earlier payoff date, without drastically increasing the amount that you pay towards your loan each month. 3. Make your payments round to the nearest hundred Similarly, rounding up your payments can have a slight impact month-to-month but a substantial change overall. If you round up your payments to the nearest hundred or, at a minimum, the closest to the entire number, you'll gradually reduce the amount of principal on your car loan. You will also get ahead of the schedule that will help keep you ahead of the interest rate and ease you into a faster payment. 4. Get rid of unnecessary add-ons If you like gap insurance as well as an extended warranty or a service contract to your loan, contact your provider and cancel these. You will be able to receive a prorated reimbursement for the remaining amount, while also lowering your monthly payment. But rather than putting that refund into your pocket use it towards the loan. This way, you'll owe less overall and benefit from a lump sum payment. 5. Make a large additional payment Bonuses, tax returns and other big lumps of money could go towards your car loan. If you can cut the amount of your principal by a couple of hundreds of dollars, it's likely worthwhile. As with rounding your payments, and making payments biweekly, it will prevent the interest from rising. When your loan balance decreases and your monthly payment increases, more will be used to pay for the principal amount, which will result in the payment being made early. 6. Pay each month Even when you're ahead of your schedule, you should still pay your loan each month. This will keep interest from rising and, in turn, more goes toward principal and thereby reducing the amount of amount of interest you have to pay. And maintaining regular payments when they aren't required can result in paying on your vehicle loan in a timely manner. If you decide not to pay off your car loan early Paying off your car loan early can mean a couple hundred dollars in your bank each month. In some instances you may negatively impact your financial situation more than it helps -- so it may not always be the best move. Do not pay your loan early if: There is a penalty for early payment. A essentially punishes you for making extra payments or paying the full amount of your loan early. The lender is trying to make up for the interest you would have incurred when you had adhered to the schedule. If there's a prior payment penalty, ensure it won't cost you more than what you'd normally have to pay in interest. Your loan uses precomputed interest . It is a way to front load the interest you have to pay every year, so it is that your first monthly payment is accounted for a greater share than the month following. If you are able to make payments on your loan early, you won't drastically reduce the cost of your vehicle loan. In this scenario it's better to stick to the loan schedule. If you don't have a lot of debt. Although it might seem odd, your credit score is calculated on the type of debt you've got and the duration of your accounts. Because auto loans are long-term debt paying on a regular basis for many years will maintain your credit score. One caveat: making payments to pay off your loan can lower your credit utilization ratio, which represents around 30 % of the credit scores. If you have other debts and an excessive proportion of debt to income (DTI), then removing one debt will help boost your score. Ways to lower your monthly car payment Aside refinancing your loan There are two methods to cut down your monthly payments either defer them or ask for a loan modification. Deferment allows you to skip a payment if you are having financial issues that are short-term. The lender may provide one to three months deferment in order to help you get through the. However, deferment will only move the payments until the close of your loan which means that you'll need to pay them back at some point. You will also be responsible for interest and at the end it will cost more. Some lenders might not be able to alter the terms of your loan, but it doesn't harm to inquire. Similar to refinancing, it can alter the conditions of your loan by either extending your time period or decreasing your interest rate. If you can get a modification to your loan or loan term, you can reduce your monthly payment without the need to find an entirely new lender. The next steps necessarily be the best option to pay off your vehicle loan in advance. If you're facing penalties for prepayment or a potential negative impact to your credit score, the savings aren't worth it. If you're looking to eliminate debt, eliminating car payments is among the fastest methods to free up your budget. Refinancing -- or simply making extra payments -- are the best way to pay off your car loan faster. Even if it's only a few extra dollars a month, you'll be able to lower your debt, and possibly reduce a few months from 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 financial matters. She's also a full-time librarian at the local library in which she helps the community gain access to information on financial literacy, in addition to other topics.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to take control of their finances by providing concise, well-researched, and well-studied information that breaks down complicated topics into bite-sized pieces.






Auto loans editor




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