According to Experian, the average car payment at the end of 2023 was more than $700 for new cars and more than $500 for used vehicles. What’s more, your prime or subprime credit score wouldn’t have really impacted your payment compared to everyone else. In other words, if you had a “good” credit score, you’d be paying about $10 more per month than someone with excellent credit. In any case, if you’re tired of your car loan, here’s how to get rid of your car payment.
Know your car loan payoff and create a plan
Until you’re aware of your remaining loan balance, you won’t be able to strategize paying it off. Call your lender or log into your account portal to determine the full loan balance, otherwise known as the “payoff.”
Once you understand the remaining sum, you can begin to create a payoff plan that will free you from the car payment treadmill sooner than your loan term.
While rare, you might be able to pay off your car loan with a lump sum
A lump sum payoff is a surefire way to quickly avoid paying interest to the bitter end of the loan’s terms. However, you’d need a relatively large sum to do so early in the loan term. Ensure that if you choose this option, it won’t leave you in a worse financial bind without that cash on hand. Additionally, confirm that your lender will allow an early payoff without penalty.
Pay a little extra each month
By submitting an amount that’s larger than your obligated payment, any additional funds can go toward your car loan principal. The principal is the core loan balance before interest. By paying down the loan balance, you can shorten the life of the loan, hence paying less interest overall.
Make biweekly car payments
Making biweekly car payments will ultimately shave off a whole month’s worth of the total loan every year. How? By making a half payment every two weeks, you’ll actually submit thirteen months of payment within a twelve-month period.
Understand car your loan payment terms
Before you move forward with any of these ways to get rid of a car payment, ensure that your lender accepts them and will submit additional funds or a lump sum to your balance without any punishment fees.
Car payments can feel suffocating and difficult to move away from. Overall, choosing a car with a retail price well within your financial comfort zone is best. Avoid entering a car loan if you can. If you must borrow from a lender, try to keep the payment as low as possible and do what you can to pay it off quickly without damaging your overall financial health.
