Buckling down on your debt can eliminate mountains of interest and boost your credit score. So, you’d think that any chance to pay off any debts early would be a good idea. While that is mostly true, there could be a downside like early payoff penalty charges and neglecting to pay off other higher-interest debts first. If you want to find out how to pay off your auto loan faster or any looming debts read on.
Is it a good idea to pay off your car loan early?
Before you throw any extra cash on paying off your debts, call up your creditor or lender and ask if they have any early payoff penalties. If they do, you should weigh out the penalty fee vs the amount you would save in interest. Outside of buying a used card or snagging a holiday deal on a new car, these are our hottest tips to eliminate your auto loan faster and put more money back into your pocket.
Pay every other week
This hack is also known as making ‘micropayments’. This is when you split your payment into two payments and pay before the due date. You can set this up on autopay with your lender and avoid any missed payments. Another debt crushing tip is to throw on an extra 20% of your payment, spread across your micropayments. If your budget allows this, you’ll have your loan paid off in no time.
Refinance (if it makes sense)
Depending on the interest rate you got when you bought your car, this might be a solid option for you. If your credit was shot when you got your auto loan, you could qualify for a better rate and save on interest. Once you’ve done this, you should apply the savings to the principal balance of the loan or invest into a MoneyLion fully managed investment portfolio with a better return on investment.
The downside with refinancing your auto loan? Dragging out your loan, while adding significant interest long-term. This might not impact the total amount paid overtime if you plan the loan off early. However, paying for your loan for an additional 60 months – plus however long you’ve already paid – for a 1-2% interest rate reduction might not be worth it.
Reduce debt-to-income ratio
If you’re looking for ways to build up your credit score, you should take a glance at your debt-to-income ratio and try to reduce it by paying down debts. Review your finances and find out which debts have the highest balance with the highest interest rates and start paying those down first.
If you hold a high balance on your auto loan, that could be a factor that’s holding your score back from increasing. A higher credit score gives you more borrowing power with better interest rates for big purchases like a mortgage. When you carry a DTI of 40% or more, lenders could see this as a sign of financial stress, and lenders might turn you away – this goes for auto-loans and any type of refinanced loans as well.
Pro tip: Creditors report payment status every 30 days. However, this day can vary throughout the month. Find out what day your creditor reports your payment history to the credit bureaus and be sure to make your payment on or before this day. If not, you’ll always look like you’re carrying a high balance.
Put extra towards the principal balance
As we said before if you have extra funds to use, put them towards your auto loan. But, be specific with your creditor. Instruct them to put the extra funds towards the principal balance. Alongside micropayments, this move can essentially hurdle you towards significantly dropping interest amounts overall.
Earn side income
More than ever, remote work and virtual jobs are becoming more common and sought after. Both employers and employees are seeing that this model increases productivity, reduces overhead cost, and offers flexibility for all.
Looking for a supplemental and flexible way to make more money? Taskrabbit offers one-off gigs like home repairs, cleaning, running errands, and contactless tasks. Find local jobs that fit your skillset, pick your schedule, and set your rate.
Cashback for your car
Wouldn’t it amazing to make money off of everyday shopping to help pay down those pesky bills? Well, look no further! When you shop with your MoneyLion Debit Mastercard or RoarMoney virtual card, you can earn cashback rewards every time you swipe!
Earn rotating online rewards from your favorite merchants or make a $10 purchase and shake your way to rewards with our Shake ‘N’ Bank feature. Download the MoneyLion app today and learn about our other ways to put your money to work!
Unload your debt while making cash
Now that you know how to pay off your auto loan faster – and smarter – you can focus on the future! From online rewards to priceless surprises from Mastercard, we help your cashback grow in a fully managed investment portfolio.
You can let it grow or take it out to pay off your auto loan or other debts. At only $1/month, you can set up a fully managed investment portfolio based on your preferences – with no minimums required. From a casual to an aggressive investor approach, you let us know what you’re comfortable with and we’ll do the rest!