How to Pay Off a Car Loan Faster

Securing an auto loan lets people buy a vehicle by making monthly payments. Over the life of the loan, consumers pay hundreds--and even thousands--of dollars in financing costs. Paying off a car loan faster will allow you to save on financing costs and free up extra cash in the future (no car payments). Securing a lower interest rate, refinancing into a shorter loan term and amortizing your loan will help you accomplish this task.

Instructions

1

Secure a lower interest rate. Check out auto loan rates online. Search for a loan that doesnt have extra fees, such application fees and prepayment penalties (fees if you pay off the loan early).

2

Talk with your existing lender. Once youve found the lowest auto loan rate, ask if your lender can match it. Lenders dont want to lose your business. If youve made timely payments the lender may be willing to negotiate your loan terms.

3

Refinance into a shorter term to pay off your loan much quicker. For example, if your current term is 60 months, check out terms that are 48 months or shorter. The payment may be higher, but if you can secure a lower interest rate, it may offset the increase in payment.

4

Make extra payments each month, called loan amortization. For example, if your loan payment is $300 you might decide to pay $500 each month. When you make extra payments, 100 percent of the extra payments are applied toward paying down the loan principal. This will save you financing costs over the long term.