Car payments can be an annoying hassle in life, but the truth is that there is no real way to avoid them. Most people do not have the tens of thousands of dollars needed to purchase a car outright, so they have to find ways to make payments. Some people may lease their cars, and there are other people who may choose to pay off the car. Even though it may not be possible to avoid car payments altogether, there are ways that you can reduce the amount that you have to pay for your car payments.
#1. Keep Up With Your Credit
When you are applying for a car loan, the lender will look at your credit. Your credit score will significantly affect the amount you will be paying monthly for your car payments. Good credit will get you a better interest rate, so it is best to sort out credit issues before applying for a loan: the better your score, the lower your payments. Keep good track of your credit score, and be sure to pay all of your bills on time.
#2. Refinance Your Car Loan
Even if you had to get a car loan that had a high interest at one time, that does not mean that you have to keep high interest for the life of your loan. You do well to find out how to refinance an auto loan and get a better deal on interest rates. Lantern by SoFi is a platform where individuals can apply for personal and business loans.
According to SoFi, ‘it is important to determine the right time to refinance your car loan.’ You want to refinance your loan when rates are low, and your credit is doing good. In this way, you can be sure that you will get the best APR on your car loan.
#3. Get A Loan From A Credit Union
Banks charge high interest on loans because they use that interest for various expenses. Banks have to support thousands of employees, and they also have to pay for the upkeep of their hundreds of brick-and-mortar locations.
Credit unions are much smaller than banks, and they have fewer locations. Credit unions can transfer their savings to their customers, so they can often offer better rates when it comes to interest. If you are not part of a credit union, you do well to join a local one.
#4. Refinance and get a co-signer on the loan
If you’re a student or young professional struggling to pay back an auto loan, you can always rope in your parents or close friends as co-signers on the loan. Refinancing an auto loan with a co-signer can reduce your monthly auto payments to a manageable amount.
However, there is an element of risk for the co-signer as he/she will bear the burden of loan repayment in case you default. It could also affect the co-signer’s credit score – so be careful who you onboard!
#5. Look for a side job or gig
Raising your income is the most efficient method of amassing wealth. The more money you can earn, the more you can put towards paying off your car loan faster.
Find ways to raise your monthly income using resources available to you. Ideas for boosting monthly income may involve:
- Finding a second job
- Working weekends or overtime at your primary job
- Having a garage sale
- Crafting and selling items
Be sure to choose an option that is both sustainable and enjoyable, helping to reduce fatigue and burnout.
#6. Buy a used car instead of a new one for lower car payments
If you’re a driver shopping for car loans and have a tight budget, it could be easier for you to buy a used car instead of a new one. The used car auto loan rates average around 3.84% while new auto loan rates average 4.3% (according to Experian data).
The monthly payment for a used car averages around $400 compared to $540 for a new one. Besides, a new vehicle loses between 10-20% of its value after purchase – while still being quite dependable. Make the most out of this and you can benefit from lower than average auto insurance payments.
Get Your Car
In most places, a car is not a luxury; it is essential to carry out your daily tasks. Since that is the case, you need to get your car. By making good choices before you apply for a car loan, you could end up saving thousands of dollars.
It is worth the time and effort to look into the different financing options available to you. You need to get your car, but you need to get it the right way, so do your homework before financing your car. Check the bank’s reputation you choose to trust before closing the deal.