How To Pay Off Your Car Loan

Alright everyone so today we are talking about how to pay off your car loan faster. I want you to keep in mind that this takes place AFTER you've paid off your credit card debt and any medical bills you might have.

Paying off your car loan is something I would suggest if you want to be debt free but let's face it......most of us will always have a car loan at some point and time. This trick will help you to either knock the total amount of your car loan down or to help you pay it off. 

Currently, both of our vehicles are paid off. I was actually able to pay off my car in 2 1/2 to 3 years. But, there were several things that I didn't know at the time that I do now.

For today's example we're going to use a $400 car loan. This is pretty much a round about figure of what a car note would be. Naturally it could be more or less depending on the total amount of your car but this will work as an example.

Before you start this method, I would save up one full payment. So in this case that would be an extra $400. The reason is because you want to make sure that you can fit it in your budget to make extra payments. You might be wondering where you will get this extra $400.......well if you've been saving money on your grocery budget and really watching what you spend, than there is no reason why you couldn't come up with this amount.

I suggest setting up a "Loan Account". This is an account that you would put money aside for your payments. If you have a $400 car loan, then put $100 into this account every week. By doing this, you're ensuring that you have the money to make your payment. Now take in mind that you're already use to making your regular payment of "$400" a month. All you're doing is saving $100 extra a week to make an additional payment to your car loan.

Here is how this works.......

You're going to make payments to your car loan BIWEEKLY!!!! This will be 1 payment to your note and than in 2 weeks make 1 payment to your principle.

   Example:     Due date     - $400 payment to NOTE

                    2wks later     - $400 payment to PRINCIPLE 

                    2wks later     - $400 payment to NOTE 

                    2wks later     - $400 payment to PRINCIPLE 

By doing this, you're going to be making 26 payments a year instead of 12. You will be moving up your due date plus knocking your principle down.

So let's do the math.......

If you made your regular payments on $400 a month like normal and your car loan was say $30,000....

                       $400 x 12 = $4,800 a year (6 1/2 yrs to pay off)

If you made biweekly payments of $400 every other week and your car loan is $30,000......

                       $400 x 26 = $10,400 a year (3 years to pay off)

That is an extra $5,600 you could be putting toward your car loan to pay off your car in HALF the time!!!!!!!!

There are several reasons why this method is important:

    - Helps you pay off loan faster

    - Reduces the total payoff and helps you with your trade-in

    - Gets you out of debt

It's really that simple. Now like I said, I understand that we all have a car loan at some point but if you did this for even the first 2 years it could really help you.

Give it a try and see how it works for you. If you have any questions please feel free to comment down below.

*~ Cassie ~*

@livingtobudget