Sometimes, your back's against a wall and a high-interest car loan is your only option. While you may get saddled with a high rate of interest in the beginning, you may not have to endure it till the end of your loan. Instead, get creative and pool your extra cash to take out another loan with a lower rate of interest.
Throw extra money at the principal. If you have other loans or credit card debts that you regularly pay more than the minimum owed, consider paying the minimums on them, while applying the difference to your car loan.
Spend your tax refund wisely. If you get thousands of dollars back, you can make a big dent in your debt. You may be sad to see all that glorious cash go toward your car loan, but you'll be better off in the long run.
Opt for a home equity loan, as long as the interest is lower and the fees attached to the loan don't outweigh the benefits.
Shop around for a credit card that has a much lower interest rate than your current car loan. Throw some extra cash -- as much as you can -- toward the payments on the credit card and you'll save money.
Refinance your loan. Check out your credit reports from the three credit bureaus. If your credit has improved since you got the loan, try refinancing with a credit union for a lower rate of interest.
- If you decide to throw extra money at the loan, tell your lender you want the extra money to go toward the principal on the loan. If you don't, the lender may apply the extra cash toward the following month's payment.
- Also, you can make two separate payments each month and make a notation on each such as "regular payment" and "pay toward principal only."
- Eyeball your car's sales contract to determine if there are early payment penalties. If there are, it may be worthless to pay the loan off early. For example, you may have to pay all the interest due under the original contract.
- Medioimages/Photodisc/Photodisc/Getty Images
- How to Start a Budget for Paying Back & Repairing Debt
- How do I Pay Off Old Debt?
- Is It Wise to Pull Money Out of Your 401K to Pay Off Debt?
- The Difference Between a Pension & Retirement
- What to Do if My Husband Won't Pay His Debts
- Snowball vs. Debt Stacking
- How Much Should I Pay on My Debt Monthly?