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That means taking out an auto loan, which means monthly payments and long-term interest charges.
The longer the term, the more interest you pay.
Thats why it can be a good move to pay off your car loan early.
Heres what you gotta know.
Consider this example of a $20,000 loan at 5% interest over 60 months
2.
This example shows how it adds up over time.
The borrower in the previous example would have a monthly payment of $377.42.
Make Biweekly Payments
Instead of making one monthly payment, split it into two half-payments every two weeks.
This will result in one full extra payment per year.
Heres how that could help you finish sooner.
Heres how a single $500 windfall two years into your loan can reduce your term and interest.
Consider the following example of someone who refinances two years into a 60-month loan with three years remaining.
Avoid Skipping Payments
Some lenders let borrowers skip, or defer, a payment.
Unless you absolutely must seek a deferment, always make payments on time to stay current.
Also, build at least a starter emergency fund before you work to end your auto loan early.
Without one, an unforeseen expense will force you into debt, which defeats the whole purpose.
Tip:Compare your loan interest rates and choose the smartest repayment plan.
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