When it comes to getting your car paid off early so you can focus on other things around your home, you have a few options to shave off either months or years. Adding to the principle as much as possible will reduce your interest and decrease your payments over time. You don’t want to get behind and have creditors take it out of your check since they can garnish up to 25% of your earnings. Below are some ways to pay off your new car quickly and get out of debt as soon as you can.
1. Round Up Your Car Payments
Most car payments have a monthly total that is an odd number in dollars and cents. You can pay more when you pay, rounding up to the nearest ten or hundred for an even payment. If you do this, however, make sure you say the extra should go to the principal and not apply to your next payment. If it applies to the next payment instead, it will add money to the interest, and you will not save as much as you can.
2. Make Biweekly Payments
Another way to cut the interest and pay down your new car is to make biweekly payments. When you make multiple monthly payments, this will reduce your overall interest and the majority of your money will go to the principal for that month. Reducing the amount of interest you pay will reduce the overall cost and the length of the loan on your new car. This is a great option for those who get paid on a biweekly schedule, setting aside a certain amount out of each check to make the payment. You still want to budget for car maintenance expenses throughout the year. About $356 is spent on service costs annually for cars.
3. Make An Extra Principle Payment Each Month
If you can’t afford to make multiple payments but want to pay what you can, you can make any extra principal payment each month. When you write that check or complete the payment online, you want to mark it as a principal-only payment so that all the extra payment is invested in the overall car total. The more interest you have on a car, the more you’ll have to pay and the longer the loan can last. You want to start paying on the principal as soon as you get the car to get it paid down. If you try to wait until a few years into the payment, you won’t make as big a dent in it as you would at the beginning.
4. Use Your Tax Refund
If you did get a tax refund back at tax time, you could always use that or a portion of it to pay for your car. This will help keep your car payments down, and could even make you eligible for refinancing the car. Depending on what you owe and how much you get back, you may even be able to pay off the balance on the car, eliminating your car payment altogether. If you attempt to pay your car off, and you aren’t able to get your title, then you may need to hire a lawyer for assistance. There are over 70,000 licensed attorneys practicing in Texas, and you can find one to help you get your car title with documentation showing the payments were made.
If you’re planning to pay your car off early, you have a few ways that you can make that happen and make it affordable in your budget. Make sure you don’t overextend too much and you can still pay your other monthly expenses while you work on paying down your car. Once it’s paid off, you can focus on other goals for your home and family.