3 Steps to Paying Off Your Auto Loan Early
Here's how to shed that debt ahead of schedule.
- Auto loan payments can be a strain on your budget.
- With the right approach, you may make yours go away sooner.
- It’s important to cut expenses or increase your income to pay off debt early.
Owning a car can be an expensive prospect. Between auto insurance, maintenance, and gas, you might spend a lot of money just to have the option to get from place to place. This especially holds true if you don't own your vehicle outright and are still making payments on an auto loan.
In fact, you may be eager to pay off your car ahead of schedule and free up that money. If that's your goal, here's how to pull it off.
Step 1: Get yourself on a budget
Maybe you have $2,000 left on your auto loan. Or maybe your balance is twice as large. Either way, to pay off that loan early, you'll need to free up cash. And putting yourself on a budget is a good way to make that happen.
You can set up a budget using a spreadsheet or notebook if you want to keep things simple, and from there, list your various expenses and what they cost you. Or, you can play around with different budgeting apps, which you may find more useful because they actually sync up to your bank and credit card accounts and categorize purchases for you.
Once you have your budget, you should have a better sense of where your money goes month after month. And that will lead to our next step.
Step 2: Identify expenses to cut back on
Once you have a handle on your expenses, you'll need to plan to cut back on some to free up money for your auto loan balance. To that end, you have choices. You might choose to cut back on one large expense, or you might decide to cut back on a bunch of smaller ones.
Let's say your goal is to put an extra $300 a month into your auto loan to get it paid off sooner. If you currently spend $250 a month on restaurant meals and entertainment, you may decide to stay home for a few months and free up money that way. Or, you may decide to cancel your $100 cable package, your $50 gym membership, your $80 subscription box, and a $20 streaming service to get to that same total.
Step 3: Boost your income with a side job
You may only have so many things in your budget you're willing or able to cut back on. If that's the case, a side hustle could be your ticket to paying off your car sooner.
There are numerous gigs you can look at getting these days. If you want flexibility, try landing a job you can do at your own pace from home, like content editing or web design. If you're able to commit to a preset schedule, see if any local stores or restaurants need extra help on evenings and weekends. And of course, you could use your car itself as an income source by driving for a ride-hailing service.
Being in debt is no fun, even if it's for a good reason, like having a car. If you're tired of having to make auto loan payments month after month, take these steps to shed that debt sooner rather than later.
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