Financing a car is a large financial responsibility and likely one of the most expensive purchases you will make as a consumer. Although you may not be able to change the purchase price you paid for the car, there are a few tricks you can apply to help you save money on your auto loan. If you have less than perfect credit and are in a financial bind, these 4 tricks can save you a lot of money on interest payments.
However, these tips will only apply to auto loans that use simple interest. This type of interest does not have any penalties associated with it for early payment and often allows you to pay off the loan faster than you would think.
Here are some easy tips on how you can save money on an auto loan:
Setup Bi-Weekly Payments
You can reduce the amount of interest you will pay later on by making your car payments on a bi-weekly basis. You will split your payments in half, but make that payment every two weeks.
If you follow the schedule, you will end up making 26 half payments, which equals 13 full monthly payments per year as opposed to just 12 payments on a regular auto loan schedule.
Pay A Little More
This may sound contradictory at first, but let us explain. Let’s say that your monthly auto loan payments are $245. If you round that number up to $270 per month, that is an additional $25 you are paying towards the principle of the loan.
This will allow you to save a substantial amount of money over the life of the loan thanks to reduced interest. This small change can also reduce the number of total monthly payments you may have to make on the vehicle during the life of the loan.
A great yet simple hack to use to lower your overall interest paid is splitting payments. Say, for example, your auto loan payment is due on the 30th. If you pay half of your monthly payment on the 15th, your overall accrued interest lowers by the time the second monthly payment comes in on the 30th.
If you applied for a typical 5 years auto loan, this can potentially save you thousands of dollars on your car loans.
Whats great about simple interest car loans is that there is no penalty or fee for paying off your loan early. Paying more per month doesn’t have to be a regular thing, but if you have extra money laying around that you could use towards lowering your auto loan balance, then do it.
Be sure to contact and speak to your lender first regarding where your additional funds will be allocated to, as all lenders and contracts vary.
If you are looking to finance your new car and have less than ideal credit, CrediReady offers one of the largest databases that connects dealerships, lenders, and buyers in all credit situations. Take a few moments to fill out our free and confidential loan search form online and we will match you with a dealership in your local area that can meet your auto financing needs.