How To Way To PAY OFF Your Car Loan in HALF the Time!

0:00 want to save $3,000 on your car loan stick around and I'll show you how in this video I'm going to show you a strategy that's so simple that you wonder why you didn't think of it sooner and trust me you don't want to miss a tip that I've got to end that could save you even more money now whenever you get a car loan the most common mistake that most people do is just paid off the agreed amount every single month until the terms are met but isn't that what you're supposed to do well yes you are paying a monthly car payment every single month and that's the minimum that you should be doing however the quickest way to get rid of your car loan is by making extra payments the right way stick with me here because later I'll cover five more ways to pay off your loan even faster no matter your financial situation all right so when you get your car loan the monthly payment is going to be broken down to two parts the principle which is the

0:45 borrowed amount and the interest which is the cost of borrowing if you are familiar with today's interest rates especially on cars they're still as high as they ever been the average new car interest rate is still hovering around 7% and used car interest rates are around 11% with inflation averaging around 3% a year it makes more sense than ever to pay off the car loan quicker so it doesn't cost you more money now I get it inflation has been a little crazy the past couple of years but historically it still has been around 3% so anytime your car interest rate is more than 3% it makes sense to pay it off sooner rather than later but here's what most people get wrong when they make extra payments they're just paying their monthly payment ahead of time instead of applying that money directly to the principal let's just say that your monthly car payment is $500 and you manag to scrap up an extra $500 to use towards your autolot so rather

1:31 than immediately going online and just selecting make payment you need to ensure that there's an option to make a principal only payment if not you may have to call the lender personally now why does this matter because paying down the principal lowers your total loan amount which reduces your interest that you would have to pay over time if you were just to click make a payment that extra $500 would be viewed as an early monthly payment so if you made a payment in June and apply the extra $500 it will be applied to the July payment and you probably will not have another payment due until August now the only way this works is that if your auto loan does not have a prepayment penalty these aren't common since most auto loans don't have this but it is best to make sure so you don't get charge extra for paying off your loan early which can end up costing you more money the simplest way to find this is by looking at your agreement or

2:17 just by calling the lender directly so let's quickly run some numbers so I can show you why this works so well let's just say that you're the average Joe and the average car loan is roughly around $40,000 at 7% interest rate for 72 months based on these terms your monthly payment will be $681 196 over the life of the loan you're going to end up paying $911,000 that goes towards the principal I get this could be a lot for some but plenty of you out there have an extra $500 not being put to good use so piggy backing off the same terms with an extra $500 your monthly payment will be

3:03 $1,181 196 the total interest rate that you pay on this loan will be $6,295 this was short on your payoff date to only 46 months meaning that your final payment date would be June of 2028 so this loan will be paid off in less than 4 years saving you shy of just $3,000 in interest now let's just say that you found this video a year later but you still have an extra $500 that could go towards the principal so let's just say that you continue your regular monthly payment which is a little under $700 for the first 12 months then go up to almost $1,200 a month from month 13 and onward the total interest that you pay over the course of this loan will be $715 110 and your loan term will be completed in just 53 months which equals to 4 years and 5 months your final payment date will be in January of 2029

3:49 the impact of doing this will shorten your loan by nearly 19 months compared to the original schedule and save you a little under $2,000 in interest compared to not making any extra payments at all now if you can't manage an extra $500 even an extra $200 can make a big difference by going this route your loan term will only be 59 months which equals to 4 years and 11 months the total interest that you pay on the loan will be $762 you see even by adding an extra $200 to your monthly payment that goes towards the principal this will save you around $1,500 compared to not making any extra payments at all now this strategy isn't just a theory it actually worked for me for my very first car loan so back when I was in the Marines I bought a 2008 Honda Civic SI at the time it was only 2 years old and I had to finance almost $20,000 so once I learned about making principal only payments I started

4:36 putting every extra dollar I had towards the principal so after deployments I would take the money that I saved and apply it directly to the loan this helped me pay off the car faster and save me a ton of money I was one of the very few people in my platoon that had a paid off car loan remember though this strategy only works if the lender allows principal only payments it's always worth checking because this can save you thousands now I know that not everybody has extra cash line around to throw out their car loans that's why I'm going to share with you five other strategies that you can use to pay up your loan faster even if you're on a tight budget and remember stay with me until the end because these tips can really make a difference the first way is to consider refinancing your car loan to secure a lower interest rate or even shoren the loan length even in this environment interest rates are still relatively high but they are starting to come down so if you got an auto loan not too long ago with a high interest rate consider

5:22 refinancing with a new lender this can lower your payment or shorten your loan term another strategy is to switch from monthly to buy monthly payments by doing this essentially you're making one extra payment each year without even realizing it rather than making 12 full payments you're making 26 half payments this simple trick can Shing your loan and reduce the interest that you'll pay another simple hack to pay off your auto loan quicker even if you don't have a lot of money is by just rounding up your payments as just say that your auto payment is $650 if you can pay $700 with that extra $50 applied to the principal this will reduce the principal much sooner small changes like this add up over time another tip is to cancel any additional add-ons when you bought the vehicle if you offer any addition additional protections or insurances it is possible to cancel those plans and get a pro-rated refund for instance if you chose to get an extended warranty there are plenty of providers out there

6:08 that will give you a pro-rated refund if you cancel early once you receive the pro-rated refund you can actually get a check for this amount and then apply that amount directly to the principal of your car loan which will lower the overall balance and result a faster payoff the fourth way is to make use of lumpsum payments whenever you can if you get a tax refund a bonus or any unexpected cash consider using it to pay down your carload these payments can significantly reduce the interest that you would have to pay ensuring the length of the loan last and certainly not least budgeting your money correctly while it might not be the most exciting thing to do but tracking your spending allows you to identify where you can cut costs honestly budgeting and figuring out where your money goes is probably one of the best things that you can do for your personal finances it's helped me countless times now I'm not telling you to create an Excel spreadsheet forever I certainly don't just do it for

6:54 a couple of months to actually see your spending habits this way you have a better picture of how you're spending and how much money that you can actually save to pay down that debt quicker there really aren't any other hacks when it comes to paying off your car loans because you're going to need some extra money to pay off this debt even if you try other strategies like velocity banking when you run the numbers those numbers won't make the debt cheaper you're basically switching that type of debt to another in addition auto loans and installment lines of credit affect your credit much differently compared to credit cards and personal lines of credit since the amounts on these often change now I get that life happens so don't put all of your savings or emergency fund into paying off your car loan ahead of time because you never know when the unexpected will happen now I've talked a lot about paying off your auto loan but if you're also dealing with credit card debt you might want to check out these videos over here I'll walk through the fastest ways to pay off

7:40 your credit cards and it could save you a lot of stress and money see you over there