When purchasing a vehicle, most car buyers are focused on getting approved for a car loan or auto financing. With auto lenders and finance companies making credit to buy a car more accessible to borrowers, it’s possible for car financing terms to stretch out for years.
Here’s how you can pay off your current car financing faster:
- Determine your current balance
When planning to pay off your car faster, the first step is to look at the details of your auto loan or financing. Generally, paying off your car financing early can save you significant interest.
- Calculate how much you’ll save
Once you’ve figured out how much you owe on your car financing, you can use a car payment calculator to determine how much you’ll save by paying off your car early.
- Focus on paying down the principal
Generally, making additional payments toward the principal can help you pay the car loan or financing down faster and have lesser interest payments. A couple methods for paying down the principal balance include making bi-weekly (instead of monthly) car payments or paying more on your monthly car payments.
How does paying off your car financing affect your credit?
Since paying off your car can help improve your debt-to-income ratio (DTI), it can have a positive impact on your credit as well. When reviewing your credit reports, many lenders and car finance companies look at your DTI to determine your ability to pay off credit. According to Lending Tree, having a completed installment financing account on your credit history could work in your favor whenever you want to apply for another form of financing, such as a home mortgage.
If you’re in the market to purchase a vehicle and need help getting approved for car financing, Credit Acceptance can connect you with dealerships in your area that can approve you regardless of your credit history.
Simply fill out the form on our website and we’ll connect you with a car dealership that can help you get started!
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