As with most loans, it is generally in your favour to pay it off sooner. Settling your vehicle financing sooner is always a good idea as you tend to save on interest charges over the long term. The National Credit Act permits you the right to increase your monthly premium. If you choose to pay in a lump sum, the credit provider must recalculate and allow you the benefit of smaller instalments or a shorter term. With most credit providers, you can settle the loan early. There may be conditions, but you will no longer be hit with a penalty fee for doing so. Paying off a car loan sooner saves you money on interest and boosts your credit rating. If the debit order for your car loan goes off on the 1st of the month, moving it closer to payday, which is the 25th for most South Africans, could save you a little extra.
Simple techniques for paying loans off sooner
Anytime one is able to pay off debt earlier than the repayment period is a relief. However, if you do not have the money on hand, how can you eliminate your vehicle finance debt quicker? Here are a few simple techniques that can help you pay off your vehicle sooner:
1. Make extra payments
Occasionally you may find yourself in a financial position where you are able to pay a bit more than the agreed-upon repayment amount. Should this be the case, consider making bigger monthly repayments. However, make sure that the amount is feasible and will not land you in financial trouble in other areas.
2. Avoid the ‘skip payment option’
Often lenders or financiers will offer you the option to skip making your payment at some stage in the agreement. Sometimes it is at the beginning, which means you are exempt from making payments for the first two months. Lenders typically also allow for a payment break during the month of December. While the overt temptation is to take full advantage of these breathers, this only prolongs your loan in the long run. While this may not seem like the worst thing, it also means that interest is tacked on.
3. Make a bonus payment
In keeping with making extra payments, for many, this is not feasible during the year. However, for some who receive a bonus, making a sizable extra payment could be an option resulting in one additional payment a year and can help you pay off your financing a little earlier.
While paying off any debt earlier requires discipline and careful financial strategy, it is not an impossible goal. When it comes to paying off one’s vehicle early, it is a worthwhile sacrifice as vehicle payments can typically lock you in for up to seven years, which is not ideal if you want to endeavour to take on another big debt such as a bond.If you need financial assistance in driving your dream car and want to apply for vehicle financing, get in touch with Earn-a-Car today to explore your options.