Most people apply for a car loan online to buy their favourite cars. But, how are you planning to repay the loan? A car loan with a long tenure means low EMIs (equated monthly instalments) and higher interest. So, you may wish to repay the loan as soon as possible.
Let’s see how you can pay off your car loan quicker.
1. Choose a Short Tenure
Tenure means the time you are allowed to repay the loan to the bank. It can be 24 months to 84 months and longer depending on the bank you choose. A car loan with a short tenure is paid off sooner than a long-term loan. That’s because it increases your EMIs and reduces the time you can pay the loan back. A short tenure also means fewer interest payments.
However, it is not a good idea if you can’t pay the required EMI. Before you get a short-term car loan, use the car loan EMI calculator to know if you can pay the monthly instalments.
2. Consider Prepayment
Prepayment means paying more on your EMIs. In addition, prepayment can help you save on interest payments. To pay off your loan faster, make additional payments every month.
However, these savings are useless if the bank charges a prepayment penalty. Use a car loan interest rate calculator to calculate your interest savings from prepayment. Then, compare it with the prepayment penalty. Consider prepayment of the car loan only if the penalty is lower than the amount you are saving on interest.
3. Refinance Your Loan
Refinancing your car loan means switching the lender. It is recommended if you find a lender offering the same loan:
- At lower interest
- With a flexible repayment plan
- At lower EMI payments
The new bank will pay off your car loan to the existing bank. Now, you have to pay the loan back to your new lender, following their repayment terms.
4. Never Delay Payments
Some banks allow borrowers to skip their monthly payments once or twice a year. It may sound tempting, but never do that! Skipping or delaying your payments will only make things worse. Delayed payments mean higher interest over the term. It also increases the length of the loan.
Research well before getting a car loan online. Check EMI, interest, and other payments to see if you can make the payments in time.
5. Look for a Part-time Job
Getting a second job for a few months is not a bad idea! In fact, it is the best way to earn more and pay more on your EMIs. So, find a job that pays you a good side income. Here is what you can try to grow your wealth through a side job:
- Doing overtime for extra money
- Selling your crafts
- Selling used items
- Getting a part-time job
Research and try other ways to make a good side income.