Owning a car seems to be everyone's dream nowadays. This is actually backed up by statistics indicating that about 50 percent of households in Australia have access to at least two motor vehicles.
Most of these vehicles are paid through car loans, and some are even taken with bad credit loans.
So, in this case, is it possible to pay off your car loan early?
Yes, this is possible. Strategies such as making a down payment, placing large payments, or choosing to make repayments fortnightly can help you pay off your loan early.
Before we introduce you to our tips, we would like to present a handful of statistics on the current automotive market.
- The total amount of car sales in Australia decreased by 2.7 per cent, as reported in February 2017.
- The sales of passenger vehicles were reduced by 4.3 per cent, while those for sports vehicles decreased by 3.1 per cent.
- On the other hand, sales for other types of vehicles grew by 1.1 per cent.
Is It Worthwhile to Pay Off Your Loan Early?
Before attempting to pay off your car loan earlier, you should establish if this is the right thing to do. You can do that by evaluating the documents for your vehicle loan. Do you have a pre-computed or a simple interest loan? Early repayment on a simple interest loan equals saving a significant sum of money.
However, a pre-computed loan is a different affair. That is because the interest was added to the repayments from the outset. Still, since diminishing your debt is a considerable advantage, paying the debt off might be the right choice for you. In addition, make sure you assess the charges you would have to pay, and if they would outweigh the savings or not.
Making a Down Payment
It goes without saying that a down payment will dramatically scale down the loan’s balance. Hence, it will save you money. Moreover, it will also reduce the repayment term. That means bye-bye debt. Of course, saving money for down payment requires time. That is something else you should take into consideration.
Make Fortnightly Repayments
As opposed to putting in money on a monthly basis, you could make fortnightly repayments instead. By doing so, you’ll manage to save money on interest by reducing the car loan’s repayment period. How is that? By merely paying every two weeks, you would add an entire month’s payment. We could refer to it as a 13th repayment if you will.
Make Larger Repayments
Naturally, another strategy for paying off your loan earlier is boosting the worth of the repayment. Still, before you go for it, ensure that your budget allows you to go down this path. Sometimes, cutting down on some expenses can help one to do so. But it’s best to examine your financial circumstances. Take into consideration costs such as car maintenance, insurance, registration, and others.
To conclude, paying off your bad credit car loan earlier is a viable solution that will help you to save money, in the long term. Making larger repayments, or changing the frequency of the payments are decent strategies that can really help you. Are there any other tips you would add to our list?