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How to Pay Off Your Car Loan Faster: Here’s What to Consider in 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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There are several ways to pay off your car loan faster, several of them without shelling out an extra dime. Auto debt not only accounts for about 9% of all consumer debt in the U.S., it’s growing: monthly payments are larger, terms are longer and APRs are higher for new and used cars than they were five years ago. Paying off your car as fast as possible frees up that money for other things.

How to pay off your car loan faster without paying more

The faster you pay off your car loan, the less you’ll pay in interest. But it may not always be possible to throw more money at your monthly payment. Here are some ways you may be able to pay off your car faster without paying additional money on the loan.

Refinance

This is the process of applying for a new auto loan to pay off your existing loan, hopefully with a better interest rate or term.

Pros. A refinance loan could help you pay your car off sooner and with a lower interest rate. Maybe your credit score has improved since your original auto loan — the best rates tend to go to those with the best credit. Average rates dropped at the end of 2019 with an average APR of 5.5% for a new car loan versus 6.0% at the same time in 2018.

Cons. Downsides should be few except for the time spent shopping for the best rate and any fees you might have to pay such as those to your state’s department of motor vehicles to transfer your car’s title to the new lender. These costs should be low, under $100.

Who it may be good for. An auto refinance loan may be a good option for you if:

  • You have a high interest rate and either your credit has improved since you signed for the auto loan or you’re not underwater on the auto loan, meaning you do not owe more on your car than it is worth.
  • If you do not face high penalties for paying off your current loan early.
  • You got the auto loan through a dealership, especially a “buy here, pay here” establishment. The average hidden interest rate added by dealers is 2.47% and “buy here, pay here” businesses are known for predatory lending practices.

How to do it. Call your lender to find out how much you owe and your APR. Refinance lenders usually ask for this information, so it’s good to have it on hand. Then you can look for the best auto refinance companies and find potential auto refinance offers.

LendingTree
APR

As low as
3.79%

Terms

24 To 84

months

Fees

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, auto loan offers within minutes. Everything is done online. LendingTree is not a lender, but their service connects you with up to five offers from auto loan lenders based on your creditworthiness.

Cancel any add-ons

Common auto loan add-ons include GAP waivers, service contracts or extended warranties, tire and wheel warranties and more — you may have agreed to these when you bought your car without understanding the full cost. Canceling them will decrease how much you owe on your auto loan, allowing you to pay off your car loan faster.

Who it may be good for. Anyone who has add-ons may be able to cancel them. The less you owe, the less you pay.

How to do it. Check your car contract, call your lender or call the dealership to see if any add-ons are listed on your paperwork. If there are any, find out what they are and consider canceling them to get a prorated return. You may need to fill out some paperwork to officially cancel the add-ons, but a few hundred dollars may be worth it.

Special note. If your car has a history of needing repairs, take that into consideration before deciding to cancel an extended warranty. If you are underwater on your car loan, think carefully before you cancel GAP, which is made to protect upside-down borrowers.

Make payments every two weeks

Instead of paying once a month, take your existing car payment and split it in half. Paying every two weeks means your loan balance is continually decreasing, which has the effect of paying less interest over the course of the loan.

Why it can be good. This is a way to essentially make an extra payment without forking over extra money.

Who it can be good for. By doing this, you’re not paying any more than you normally would, but it has the effect of making an extra payment a year, so it may be especially good for someone on a tight budget.

How to do it. Check with the lender to be sure you won’t run into any prepayment penalties. If not, make a half payment every two weeks instead of one full payment each month. You could automate your checking account to send the payment, or give permission to the lender to automatically pull the payment.

How to pay off your car faster with the most bang for your buck

Have extra cash to put toward your auto loan? While the methods above are good, the fastest way to pay off your car is to increase the amount you’re spending. Almost all of these tips involve making extra payments to the principal, the amount you owe on the car not including interest. But first check with your lender that you will not be penalized or charged a fee for prepaying your loan.

Make extra payments to the principal

Why it can be good. Auto loans have simple interest, which means that for every dollar you put toward the principal, you pay exponentially less interest to the lender.

Who it can be good for. Anyone who has an auto loan from a lender who doesn’t penalize early payoff or payments to principal.

How to do it. Call the lender and ask how you can make extra payments to the principal only. You should do this because extra payments not to the principal means you’re paying interest — all you’re doing is giving the bank money early. If you make payments to the principal, you’re not paying as much in interest, which is very good.

Round up

If you find it difficult to save money or you don’t have quite enough cash to make a whole extra payment, check out this round-up method.

Why it can be good. You could pay off your auto loan early without changing how often you make your payments.

Who it can be good for. If you have a hard time saving money, this is a good way to do so.

How to do it. If the lender will not charge a prepayment penalty, you have nothing to lose by doing this and you can do it in two ways:

  • Simply round up your monthly payment. For example, if your monthly payment is $350, round up and pay an even $400.
  • Use an app, such as Acorns, to round up what you pay on all of your purchases to the nearest dollar and then pay that money to the auto loan. For example, if you got gas for $15.30, the app would round the charge up to $16 and $0.70 could go into your savings account. A little goes a long way and by the end of the month, you may have $50 you could put toward your auto loan.

Avalanche versus snowball

We’re not talking about the weather; these are two popular methods used to pay off debts faster. The avalanche method prioritizes paying off high-interest debt first. The snowball method involves paying off your debts starting with the lowest amounts. You can read about more debt payoff methods here.

Why it can be good. These are methods that could help you pay off all your debts, not just your car loan.

Who it can be good for. If you have multiple loans or debts, these methods may help you organize them and pay them off.

Snowball method: how to do it. This is a three-step pattern that should allow you to “snowball” your money to pay off your car loan faster.

  1. Look at your loans and rank them from lowest to highest.
  2. Then focus on that smallest loan, paying it off as quickly as you can with any extra cash available while making minimum payments on your other debt.
  3. Once it’s paid off, congratulations! You no longer have that payment to make. Choose another loan and repeat the process, using the money you would have paid on the loan you paid off.

Avalanche method: how to do it. This method prioritizes debt with the highest APR. For example, if you’re paying a higher interest rate on credit card debt than your car loan, you may be better off using any extra cash to pay that down first.

  1. Look at your loans and rank them from highest APR to lowest.
  2. Determine how much extra cash you can put toward the debt with the highest interest while making minimum payments on your other debt.
  3. Once it’s paid off, roll the money you were using to pay down that debt into the next one.

Windfalls

Regular extra payments may not always be realistic for your budget, but if you get any money outside of your budget that you didn’t count on, using that money as one-time extra payment toward the principal could really help.

Why it can be good. Any “windfalls” you have, such as a tax return, a refund, a bonus, a big tip or a pay raise, can be put toward the principal on your auto loan.

Who it can be good for. If you were not counting on the windfall, the extra money you got is just that — extra money. By using it as a payment to principal on your auto loan, you’ll save more money because the less you owe, the less interest you’ll pay.

How to do it. It might take some self-control, but use the windfall cash to pay the auto loan. The sooner you’ll pay it off, the more money you’ll have later to spend on things you’ll enjoy.

Make extra income

If your regular paycheck isn’t able to stretch any further, consider a side hustle and put the earnings toward your auto loan.

Why it can be good. A part-time job a few hours a week could add up to enough cash to make a significant dent in what you owe.

Who it can be good for. Anyone with some extra free time may be able to find a part-time job, temp work, freelance assignment or other gig.

How to do it. Depending on what you’re willing and able to do, you could sign up at a temporary work agency, look on job sites and/or talk to people you know about any job opportunities. Just remember to spend the money you make on paying off the principal of the auto loan. You can check out 15 legitimate places that will pay you to work from home and 5 ways to make extra money that don’t take much time.

Remove extra expenses

What are you willing to cut out of your budget or give up to pay off your car loan faster? Again, every bit helps, if the extra cash goes toward the principal of your auto loan.

Why it can be good. If you aren’t willing or able to make more income, spending less can be an equally good option and, as a bonus, you can keep doing it even after your car is paid off and save the money.

Who it can be good for. Practically anyone could do this.

How to do it. Take a look at your credit card statement or write down what you buy so you can see your spending habits in black and white. Then, decide what you could cut out or possibly get a better deal on — it might add up to more than you think. Maybe you could eat out once a week instead of every day. Maybe you could find cheaper auto insurance. Then apply that savings to your auto loan principal.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]

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Car-Buying Secrets Dealerships Don’t Want You to Know

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Buying a car is one of the biggest purchases most of us will make and dealerships don’t have the best reputation for making the process easier or cheaper. Car buyers are increasingly distrustful that they’re getting the best deal possible at the dealership. We’ll let you in on nine car-buying secrets dealerships don’t want you to know. These tips will help you navigate the car-buying process and may even save you money.

Secrets dealerships don’t want you to know

Here are the biggest tips that could help you save the most money in car buying.

1. Focus on price, not the monthly payment.

Twenty bucks, give or take, on your monthly payment might not look like a lot, but it adds up over the life of a five-year (or longer) loan. Dealers are counting on the fact that your focus will be on your monthly budget and work hard to inch up that payment. Even a few dollars can mask a high APR, add-ons and other fees, especially if they’re spread over a long term, as long as 84 months.

TIP: Focus instead on the “out the door” price, which is the total of the car price plus all taxes and fees.

2. You’re in charge.

Salespeople like to mix numbers — new car price, trade-in value, financing — which makes it more difficult for you to keep track. You can insist on talking about each thing separately by using a favorite dealership tool to your advantage. It’s called a “four square,” a sheet of paper divided into four boxes, and is used to (mis)direct your attention to all of the advantages the salesperson wants to discuss. Write on the four square yourself to direct the salesperson’s attention to what you want to discuss. You can see an example of the four square and read up on the people you might meet at the dealership here.

3. Use NADA to value cars like a dealer.

The National Automobile Dealers Association (NADA) value is what dealers and lenders use to figure out how much a car is actually worth. And you can look it up for free on the same site they use: NADAguides. If the vehicle price you’re quoted is significantly higher than its NADA value, it might be best to keep searching or get ready to negotiate.

TIP: NADA isn’t the only pricing guide — you could also check Kelley Blue Book and Edmunds to see if their prices line up with NADAguides. Dealers may have access to industry-only guides like Hearst’s Black Book or the Manheim Market Report.

4. Get your own loan.

Get preapproved with a lender of your choice before you go to the dealership. Dealerships make the most money not from selling cars but from setting up their financing. Dealers can and often will raise a lender’s APR and take the difference as profit. The best way to know what APR you deserve is to apply for a loan directly. You could start with your own bank, credit union or online lender. We’ve also rounded up several of the top lenders for used and new cars.

5. Take the rebate, not the low APR financing.

If you’re offered the choice of a rebate or a low APR, take the rebate. You might sell the car before you can take full advantage of the savings from a low APR, whereas the rebate is money saved now.

TIP: It involves more legwork on your part, but you could “double dip” by financing with the manufacturer in order to get the rebate and then refinance later (but not too much later) with a different lender in order to get a lower APR.

6. Say no to add-ons (probably).

Dealerships also make money on add-ons such as GAP insurance and extended warranties. In most cases, it’s best to say no. But some could be worth the price if they are set at a fair price. Typical GAP insurance shouldn’t cost more than $400. Prices on extended warranties vary greatly — you stand to get the best price if you do some research beforehand.

7. Use your phone as you go.

Don’t be afraid to whip out your phone to look up competitor pricing on cars and add-ons, even in the dealership office. Some fees, including destination charges or taxes and title fees, are generally non-negotiable, but you might be able to negotiate add-ons.

8. Waiting forever? Go eat.

Long waits at the dealership might be because the staff is sincerely busy or it could be a tactic to wear you down. If you are waiting for an excessive amount of time, tell your salesperson you’re going to lunch or dinner or grabbing a coffee and will return later. That will either make the process move faster or give you a nice break.

TIP: No, it shouldn’t take an excessive amount of time to shop for and buy a car, but you’ll have to set aside some time. The average buyer spends about 14 hours from the moment they begin researching online or talking with friends and family, test-driving cars, to the day they sit down with the seller, the latter step eating up about 20% of the time.

9. Read the paperwork.

Even when you’ve followed all of these car-buying secrets to get the best deal on a car and car loan, don’t overlook the final details. It’s important to understand everything you’re signing even when (and especially when) you’ve spent hours at the dealership or are excited and want to drive away ASAP with your new wheels. If details have changed or you’re feeling pressured, it’s OK to walk away. In most cases, that car will still be there another day.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]

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Auto Loan

Chase Auto Loan Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Chase auto loan review
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Going into a dealership without knowing what auto loan you qualify for can be a dangerous adventure for your wallet. It’s best to have a couple auto loan preapprovals in your back pocket so the dealership can’t take advantage by charging you a higher APR. To help you research which lenders offer best rates, we did some work for you. Here, we’ll review auto loans by JPMorgan Chase & Co: the company, its rates, its pros and cons, how to apply and who may be a best fit.

About Chase

The largest bank in the U.S. with more than $2 trillion in assets, Chase offers everything from mortgages to credit cards.

Chase offers auto loans in all 50 states and D.C. with terms from 36 to 72 months. It also offers the car-buying service TrueCar at no extra charge. This service lets you see what others have paid for the same or similar cars, and has a network of TrueCar-certified dealers which compete for your business with clearly posted car prices.

Chase financing: At a glance

A Chase auto loan could be an option for you, whether you’re looking at a new or used car from a dealership. The bank may also refinance your existing auto loan or help you buy your car at the end of its lease period.

Though Chase declined to share its APR range, “Chase Auto offers competitive rates based on [a] customer’s credit history and the structure of the loan,” said Shannon O’Reilly, a communications executive with Chase, specializing in auto finance. You may be able to get an idea for what rate you might receive by using Chase’s Auto Loan Calculator.

Chase loan rate example

We used the Auto Loan Calculator to compare APRs for a new 2018 Honda in Michigan.

Credit scoreAPRMonthly payment
Excellent4.49%$365
Very good5.04%$371
Good6.84%$390
Fair15.09%$487
APR and monthly payment are for a 72-month loan of $23,000. Rates vary by location. Rates as of 1/7/19.

Are you an existing Chase customer? Chase offers a 0.25% rate discount for Chase checking customers interested in refinancing an existing auto loan. To qualify, you’ll need to have a Chase checking account before you apply for a Chase auto loan, and elect to have your monthly car payment automatically deducted from your Chase account.

A closer look at Chase auto loans

Here are the strengths and weakness we found looking at Chase auto loans. Be sure to compare any auto loan offers you may get from Chase with offers from other lenders.

Highlights of Chase auto loans

  • Credit decisions are usually made within three hours; three days is the maximum time to receive a decision.
  • There is no application fee.
  • Chase ranks in the top half of JD Power’s 2018 U.S. Consumer Financing Satisfaction Study for auto loans.

Lowlights of Chase auto loans

  • Chase doesn’t offer coupon books for you to keep track of your payments.
  • You may not be able to get a loan with Chase if you have poor credit.
  • Chase doesn’t offer auto loans for cars bought in private sales.

How to apply for a Chase auto loan

To apply, you’ll need to go to Chase’s website, call Chase or go in person to a Chase branch.

Whichever way you decide to apply, you’ll have to provide your personal information (e.g. name, date of birth, address, phone number, email, Social Security number), employment and income, the car you want, the loan amount and loan term you want.

You could apply by yourself or with a co-applicant. And if you need to change the car, loan amount or loan term once you’ve begun the application process, you could simply call Chase. Still, keep in mind that any changes you make could result in changes to your APR and other facets of the auto loan offer.

The fine print

To qualify for a Chase auto loan, you need to be at least 18 years old (in Alabama, 18-year-olds have to meet specific state requirements). Chase doesn’t finance all makes and models of cars: some lenders are reluctant to finance a car that is older than 10 years, has more than 100,000 miles or has a salvage title; Chase says it reviews any unique circumstances on a case-by-case basis.

Any offer Chase provides is good for 30 days. If you decide after 30 days that you would like to get an auto loan through Chase, you’ll need to apply again.

Who is Chase best for?

Chase loans are best for existing Chase customers. If you aren’t already a Chase customer, you may be able to quickly become one and receive the 0.25% rate discount on your auto loan. The convenience of having everything in one account, especially if you’re already a Chase customer, is alluring.

It also doesn’t hurt your credit to apply to multiple lenders within a 14-day window anymore than it would to apply to one lender — plus, shopping around for a car loan is one of the smartest things you can do.

So, if you think Chase may be a good fit for you, apply to Chase and compare the offer you may get with responses from other lenders. Potential lenders include your bank, credit union and online lender. And at LendingTree you could fill out an online form and receive up to five potential auto loan offers. LendingTree is the parent company of MagnifyMoney.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at [email protected]