If you are wondering how to reduce charges on a car loan, there are some proactive steps you can take to do so. A car loan can be a burdensome obligation, so it's a wise move to pay it off as quickly as possible. Between loan fees, car loan payments, and accrued interest, the money you pay adds up fast. It is in your best financial interest to follow these guidelines to help you reduce the charges - some of them accruing at this very moment!
- Know your credit score. Over time, as you keep on top of car loan payments, your credit score will increase, and that may allow you to refinance your car loan to get a lower interest rate, thereby reducing monthly payments and overall interest paid.
- Make your monthly loan payments early. By paying earlier than you are required to, you save money in the form of accrued interest. Interest is charged on your loan at a daily rate, so paying a week, two weeks, or even a month early saves you money in the long run.
- Make your payments on time. If you can't make your monthly payment early, at least do it on time. Doing so helps your credit score and you wont' be charged late fees.
- Make payments EVERY month. Don't miss any payments or pay late fees as a consequence. Too many missed payments will negatively affect your credit score.
- Make extra payments. If you can swing it, pay twice as much as the monthly minimum. The more you pay in a month, the more the principal of your loan is reduced, which in turn reduces monthly interest charges. The faster you reduce the principal, the faster the loan is paid off and the less interest you pay.
Reducing charges on your car loan does not require complicated steps; just a little financial discipline which will go a long way towards saving you money.