Many seek finance from banks and Non-Banking Financial Companies (NBFCs) to purchase their dream car. Buying a car through an auto loan helps you budget your finances in a smooth manner. Besides, lenders, these days offer numerous benefits such as competitive interest rates, extended loan tenure, higher borrowing amount, quick disbursal, and flexible repayment schemes. This makes auto loans a great finance option.
If you have borrowed a car loan, try to repay it as quickly as possible. This reduces the burden of debt and helps you gain financial freedom. Following are four tips to repay your auto loan faster:
- Make an extra payment
One of the best ways to pay off your loan faster is to make an extra payment as and when possible. You may pre-pay your loan in case you receive a lump sum amount through the sale of an asset, such as property. You may also use the raise or bonus you receive at work to pre-pay your loan. Making an extra payment helps in reducing your loan amount to a great extent. But, check with your lender before making any additional payments. Some lenders levy prepayment fees. Make a prepayment only if the benefits offset the prepayment charges.
Many lenders have a car loan EMI calculator on their websites. Through this digitized tool, you may not only calculate the amount you wish to borrow, but also the balanced amount to be repaid after making an extra payment.
- Decrease the loan tenure
Loan tenure refers to the period of repaying the loan. Greater the loan tenure, higher is the interest payable. Decreasing the tenure of the loan helps in paying off your loan faster. Remember, a shorter loan tenure indicates higher EMI. Hence, if your finances allow a high installment payment every month, you may seek to decrease the loan tenure.
- Put a temporary hold on luxuries
Revamp your budget to reduce any sort of unnecessary expenses. Identify those luxuries where you spend a great deal of money such as frequent outings, travel plans, and music subscriptions, besides others. You may temporarily cut down your expenses on such luxuries and use your newfound savings to repay your new or used car loan.
- Switch to a lender offering lower interest rate
The rate of interest is the most important aspect of a loan. Higher the interest rate, greater the amount to be repaid. You may, therefore, compare numerous lenders before selecting a single financial institution. If you already have an existing loan, consider switching to a lender offering a lower interest rate. This helps in reducing the amount to be repaid and thus lets you clear your debt as soon as possible.
Repaying your loan sooner is great for your financial future. It helps in saving a significant amount of money through interest and also decreases the overall term of the loan. Take the aforementioned tips into consideration and quicken your debt repayment.