Everybody is very excited for a new car but in the rush, you often forget to secure a safe and sound budget friendly auto loan which in future will not eat big chunks out of your budget, but help you ease out the burden on your financial planning. The rush makes us forget about the big interest payments which not only bundles up but also are a great cause of stress in the future. Therefore, we should not make the common mistake of not adding the cost of auto loan in our auto expenditure and make some smart choices this year while purchasing an auto.
Do not buy a car you cannot afford. This is because car is not an appreciating asset, but on the contrary, it depreciates rapidly. The price of a car depreciates just as you move out of the showroom.
Here are some tips to save yourself some large amount of money of your budget:
1. Check Your Credit Score
To pay off your car loan easily and timely, you must check your credit score so as to avoid heavy interest payments and to pay the major amount in the first go. This will ensure that the burden will reduce in future and you are able to make timely payments.
2. Rounding Up Amounts Is A Huge Help
Rounding up to the nearest hundred will surely ensure fast payments and savings on interest payments. Assuming that you have a payment of Rs. 20,000 to make at 3.9% rate of interest within 48 months, then the interest rate payment would be Rs. 450.69 per month but rounding it off to Rs. 451.00 will ensure that the loan is paid off much faster and you will have to actually pay less considering the compounding effect. It is a win and win situation for you.
3. Make More Payments In A Month
If you pay more money frequently, then it will reduce the interest amount. Prioritize your auto loan, and pay off faster than expected and then you can save more of your hard earned income. This will ultimately reduce your interest amount and as they say, ‘Money saved is money earned!’
If you are getting the same loan with lower rate of interest, then why not take it? But do not jump into refinancing without giving it a thought! Refinancing is not only about lower rate of interest, but the time period also matters. If you are offered a lower rate of interest but longer duration there is no point of grabbing the opportunity because you will finally end up paying more in the form of interest payments.
5. Skipping A Payment Is Never An Option
Skipping a payment is a big no, skipping one payment makes you want to do it again and then again. Also, it adds up to your interest payments. Do not take bank offers during vacation season of freeing up your loan payments for a month or two so as to facilitate your trips. It is a big trap; these gifts will cause you more interest payments. Not only this, it will lower your credit score.
6. Make Additional Payments
Well, luck comes to you on its own – whether it is a work bonus or a tax refund, it will help you with your interest payments. You will have extra cash to use it and pay off your loan. Luck is not the only important thing in life, planning is a more important feather to add to your cap.
7. Prioritize Your Expenditures
With an auto loan to be paid off, always prioritize your expenditures. You can skip some of your pampering sessions and a dinner or two and make more payments to pay off your auto loan. It is all about prioritizing, making the right decisions and planning. Straighten out your budgets and see the magic for yourself.
8. Keep Short Durations For Your Loans
When it comes to loans short durations help, sometimes people because of lower interest rate end up paying more interest payments. Make sure that short duration does not get you in a position with very high rate of interest. Good amount of thought should be put while finalizing an auto loan.
The Bottom Line
The ultimate aim while getting an auto loan is low rate of interest and short duration so that you do not drown under the heavy interest payments. Planning and proper brainstorming prior to getting an auto loan is very important. Luck plays a very crucial role with the market situations and inflation rates but one’s own presence of mind in the market and financial game is very important. Banks know how to treat customers, but one’s decisions should be taken carefully and proper thought should be put into all the options without any rush. Try as many options as possible. There is no need to rush. It’s your hard earned money to put, therefore, use it wisely and cautiously.