6 Hacks To Pay Off Your Car Loan Faster
Written by
Cynthia Measom
Edited by
Jenna Klaverweiden
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Signing on the dotted line and sliding into the driver’s seat of a new car can leave you feeling on top of the world — until the monthly payment is due. Monthly payments can stretch out over nearly six years on average, according to the most recent car-buying data from Edmunds, which, unfortunately, means paying years’ worth of expensive interest.
Save money with these expert hacks to pay off your car loan more quickly.
Also see 10 ways smart people save money when buying a new car.
Make Biweekly Payments Instead of Monthly
Andrew Lokenauth, founder of Fluent in Finance, said that when you make biweekly payments instead of monthly ones, you’ll end up making 13 payments instead of 12 every year. With this strategy, you’d pay half the monthly amount every two weeks.
He pointed out that opting for biweekly payments is easier on a budget since it aligns with most people’s paychecks, and it will reduce interest charges because you’re paying more frequently. “This simple switch can shave months off your loan term,” he explained.
Make Extra Principal Payments
“Making additional payments directly to the principal balance is a game-changer,” Lokenauth said. “Even small extra amounts — $20-$50 — can make a big difference over time.” He said an easy way to do this is to round up your payments, such as rounding up from $675 to $700.
Lokenauth explained that this strategy will reduce the interest you pay over the life of the loan. “Make sure to tell your lender it’s for ‘principal only’ — this is super important,” he said.
Use the Income Windfalls Strategy
Lokenauth suggested using unexpected money to tackle your car loan. He recommended applying any tax refunds, work bonuses or gifted cash to your car loan’s principal.
“Your future self will thank you for being responsible,” he said.
Use Side Hustle Income for Extra Payments
Similarly, if you have a side hustle, Lokenauth said using the extra income specifically for car payments can speed things up when it comes to paying off your car loan.
The median income for a side hustle is about $200 per month, according to Side Hustle Nation, which could mean $2,400 extra per year toward paying down your loan balance.
Consider Refinancing Opportunities
Refinancing opportunities could be another good option to save money. “Sometimes getting a better deal can make a huge difference,” Lokenauth said.
He explained that if your credit score has improved since you received your loan, you might be able to save thousands in interest charges. “Check if interest rates have dropped since you got your loan, and look into credit unions; they often have better rates,” he explained.
Evaluate Your Budget
“Finding hidden money in your budget isn’t as hard as you might think,” Lokenauth said. “Cancel unused subscriptions, cook at home more, look for cheaper insurance rates and review your monthly bills for places to trim expenses.”
Then you can put that money toward your car loan, he said.
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