Sunday, 28 March 2021

5 Simple Steps To Pay Off Your Car Loan Faster

I just want to go over five simple steps that you use to pay off your car loan. This is what specifically worked for me, and if this sounds like something you're interested in, then let's get started 

1. Create A Budget

You'll need to check your income and expenses, it will take some trial and error so expect it to take about one to three months before you get a more accurate number. And this will first help you understand how much money you have to put towards your debt. So it's a really important step, you want to create a budget, track your income and expenses, and it'll give you a good estimate of what you can put towards additional car payments every month.

2. Pay Off Smaller Debt First 

You wanna pay off any smaller debt you have first. If you have any smaller debt, the benefit to paying it off first is not only that it's just rewarding, but it helps free up more money to put towards any larger debt. I truly recommend this step. If you have any smaller debt, for example, any credit card debt, you want to make sure you're paying that off first, and then you can move on to paying off your car loan.

3. Increase Income & Save More

Some examples are creating a side hustle, doing some freelance work, picking up some extra shifts, taking on a second job, maybe using some cash back apps, couponing, just anything to keep more money in your pocket. I recommend taking on some more shifts or getting a part-time job or just anything. If you can do some freelance work, anything that just helps with more income.

4. Sacrifice 

Know your wants from your needs, you don't need to go out to lunch, you don't need to go on vacation, going on vacation is nice, but maybe try a staycation instead, try packing your lunch, another thing you'll want to do is resist temptation, I know sometimes you'll be online and I'm guilty of it, I'll be shopping on Amazon and I'll see something that I want, but try to wait 72 hours before you actually purchase that item. It'll really help you understand whether or not it was just an impulse buy. Usually, after 72 hours I realized that I don't even want the item, I didn't really need the item, it was just something that was tempting me at that time. So if you can, try that, that helped me, and it still helps me to this day

Another thing that's really hard to do is sacrificing going out. If you can, it is okay to say no, so if you can resist this temptation of going out, going out to eat, going in and getting drinks, going to concerts, going to events. I promise you it's only going to be for a short period of time especially while you're just trying to achieve this goal. So if you can resist this temptation, it's going to help you tremendously. Learn to say no. I promise there will be more opportunities in the future and it's going to be worth it in the end when you're saving all this money and all that extra money that you save from going outgoing, going to concerts, grabbing drinks, it's all going to go towards this car payment and it's all going to go towards paying off the set, and it's going to move that much faster and get you there that much faster.

So remember you are going to have to sacrifice some things. It's going to be hard but it's going to be worth it.

5. Amortization Schedule & Payments

Make principle-only payments and you need to make these monthly. You also want to request an amortization schedule, so if you can request an amortization schedule from your auto loan service provider. I personally used one on excel it was a great tool that I used, it truly kept me motivated, I would be able to see how much of my payment was going towards principal, how much was going towards interest, and when I saw the interest going down every month and the principal going up, it truly helped keep me motivated. If you know how to use excel and you know how to create that spreadsheet, I recommend doing that. I think you could also possibly google some spreadsheets. I think you can find some online as well, but it really came in handy and I love seeing the progress that way and it kept me on track and let me know what pace I was moving at, and how long until I was done paying off the car. 

Moving into payments. When it comes to payments, you want to continue making your monthly payment but in addition to that, you want to make principal-only payments. So what this does is helps decrease your interest. You don't want to wait until you have a huge lump. For example, you don't want to wait until you've saved up $10,000. You want to pay that principal only payment every single month because doing that brings down the total amount owed, which means, you are paying less in the interest the following month. So every month I recommend you do your regular payment and then do a monthly principal-only payment. This helps save you a tremendous amount of interest and it helps when you're making your monthly payment. You'll notice that more is going to principal every month, versus, interest.

Remember to be aggressive with your principal-only payments, by this, I mean, remember we're sacrificing for a reason, so put every dollar, put every cent towards that. It's gonna feel hard and it's gonna be an adjustment like I mentioned before, but it's gonna be worth it. So put every single dollar, every single penny into that principal-only payment, it's gonna make everything go by so much faster, and you're gonna see how much that is dropping every single month and it's gonna keep you motivated. 

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