Published on November 3, 2022
4 Tips For Repaying Your Car Loan On Time To Get Out Of Debt
Today, cars are growing in demand as they provide convenience when it comes to travelling. For those who desire a car yet lack the funds to own one, car loans offer an alternative solution. However, car loans are not favoured by many as cars depreciate quickly and lose their value over time. Hence, it is advisable to clear off your loan as fast as possible.
Here are some vehicle finance solutions that will help you do just that.
1.Refinancing your car loan
Auto refinancing your loan is a great way to reduce your loan term and pay them off easily. Not only does refinancing a car loan in Singapore allow you to take a new loan with better terms but it also lengthens the term of your loan. While your monthly repayments would be lower, more interest is generated as you repay the same principal amount. This means the longer it takes for you to complete your loan repayments, the more interest you will pay.
2.Round up your repayment sum to the nearest $50
Instead of paying what the bank tells you on your commercial car loan agreement, round up your repayment to the nearest $50 to complete it quickly. For example, you took a loan of $10,000 at an interest rate of 10% for 5 years. Your monthly payment would be $212.47 and once you’ve completed paying off your loan in 60 months, you would have paid $2, 748.23 in interest.
If you round up your monthly payment to $250 a month, you’ll be able to complete your loan term in 47 months and pay only $2,214.69 in interest, giving you a huge saving of $533.54. So, although you pay a little extra each month, you get to pay off your loan quickly at a lower interest rate.
3.Do not extend your repayment loan
Even though extending your commercial car loan in Singapore can provide you with much-need payment relief, it might not be the best financial move in the long run as they almost always come with higher interest rates. By extending your monthly loan, you will also be owing the bank more than what the car is worth for a long period of time due to its depreciation rate.
4.Make biweekly payments
Bi-weekly payments allow you to make one extra payment every year. As some months have 4 weeks and others have 5, making your payment 2 weeks once means that you’ll pay 26 half-payments or 13 full payments as opposed to the normal 12 full payments in a year. This will help you make one additional payment in a year and close the loan earlier. For example, if you have a 60-month term car loan, you will be able to complete your loan repayment in 54 months. This gives you 6 debt-free months!
Extra note: Should you have some extra money and would like to pay off your commercial car loan in Singapore with it, make sure you specify it for the principal payment. If you do not specify this, your extra money will go towards your next monthly loan payment instead, hindering your goal of settling your car loan earlier by paying lower interest.
Finding the best way to finance your next car? Our team at Swee Seng Credit will be able to help you get the best loan according to your overall budget and needs. Do contact us to know more about how you can settle your outstanding loans quickly.