Shave off some of that auto loan interest! (Article)
Shave off some of that auto loan interest!
So, you just got a great deal on a new car and you’re so excited to show it off! You’re also pretty proud of yourself for the interest rate you scored, BUT you just got your first statement and are doing a double take at how much of your payment is going toward interest. Isn’t there any way to cut this down?
Here is an idea: make a bi-weekly payment! You can make a payment every other week instead of once a month. (One item to note here: most lenders allow this, but double check with your lender before proceeding.) Simply split your monthly payment in two and pay half at the midpoint of the month and half at the end of the month. You end up making 26 half payments or 13 monthly payments instead of 12 and can take months off of your loan. One extra monthly payment per year, all while keeping your budget on track! Here is what an example would look like:
- Loan Amount: $25,000
- Loan Term: 60 Months
- Interest Rate: 5%
- Monthly Payment: $471.78
- Bi-Weekly Payment: $235.98
- Savings with Bi-Weekly Payment Method: $323 in Interest and 4 Months of Payments
Not a fan of the above? That’s ok. You can also: double the monthly payment (assuming your budget allows for this), pay an additional amount toward principal every month or as you’re able, or round up your monthly payments. Bottom line: the faster you can get those auto loans paid off, the better and there are a number of ways to do it. You save money by eliminating the interest payments, free up your monthly cash flow by reducing the months you need to make payments, and even improve your credit score!
You’re Just Getting Started
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