People are looking for ways to cut down on expenses and save more every month. For many, this means cutting back on eating out, switching to a smaller cable package and looking for better deals. Reducing monthly payments to a car loan is also a great way to minimize the hits to your wallet. If you want to lower your payments, you have several options.
Here are five ways to lower your monthly car payments with ease.
- Add More Time to Your Payoff Period
Monthly car loan payments depend on the loan amount, the interest rate, whether the car is new or used and the length of the loan. Shorter loan terms result in larger monthly payments. Extending the length on the loan over a year or two can significantly reduce your monthly payments.
Be aware that adding extra time to the payoff period increases the total amount of interest you pay during the loan term.
- Make A Down Payment
The easiest way to reduce your car payment is to make a large down payment on the car when purchasing it. One advantage of making a large down payment is that it lowers the size of the loan. It also lowers your monthly payments and reduces the interest charges of the loan.
- Refinance Your Auto Loan
Refinancing is a great option, especially if you are paying a sky-high interest rate. A car loan could be cheaper if it is refinanced to a lower rate and its term extended. Refinancing to a lower rate reduces the monthly payment meaning you’ll be required to pay less than what you currently pay.
This option works well for those whose credit score has improved since they purchased their car. If you consider refinancing the loan, make sure to shop around to find the best terms your credit scores will allow.
- Refinance to Get A Better Interest Rate
The interest rate is a big factor in determining your monthly car loan payments. It is based on your credit score and added in the annual percentage rate. Applying for a refinanced loan with a lower interest rate reduces your monthly car payments.
Approach different lenders when looking to refinance your loan. You may get a lower interest rate if you check with several auto lenders. Worth remembering is that your credit rating will be affected when you apply for a refinancing loan.
- Change the Loan to A Lease
Another great way to lower your monthly car payment in to transfer the loan into a car lease for the remaining term. With a lease, you’ll make low monthly payments to rent the car for the remaining length of the loan. When the lease term is over, the lender may give you the option to lease another car or buy the car at a specific price.
The best way to lower your monthly car payments is to agree on flexible terms when purchasing the vehicle. However, these five tips will help ease the sting of your monthly payments on a car you already bought.