A car loan helps you purchase the car of your dreams. Whether it’s a new car loan or a pre owned car loan (used car loan), the universal rule is that you will end up paying more than the value of your car. Since the loan comes with an interest component, you end up paying a lot more with each year. A car loan comes with loan tenure of 5-7 years. But that does not mean that you end up paying the loan till the very last month. Here we shall mention in 3 ways what happens when you pay off a car loan early;
Rounding off your EMI to the nearest 1000 rupees:
If you took a loan worth 3 lakhs for 7 years at 12.00% interest then it would mean that your monthly EMI obligation would be 5296 rupees. Instead of paying this, if you can round off the amount to the nearest 1000 that would mean that instead of 5296 you can pay 6000 rupees per month. This will ensure that you will pay your loan off earlier by 13-14 months and also save on interest money up to 27,000 rupees.
Make one large extra payment each year:
If you took a loan worth 3 lakhs for 7 years at 12.00% interest then it would mean that your monthly EMI obligation would be 5296 rupees. Once in the year, make a large EMI payment instead of your usual EMI amount. For e.g.: If you pay 15,000 for one month each year, then you would pay off your loan 16-17 months early and save on interest money up to 30,000 rupees.
Make one large payment during loan tenure:
If you took a loan worth 3 lakhs for 7 years at 12.00% interest then it would mean that your monthly EMI obligation would be 5296 rupees. Once during the whole loan tenure, if you pay 50,000 as a onetime amount instead of your usual EMI of 5296, you would end up paying off your loan 15-16 months early and save on interest money up to 40,000 rupees.
Using these three ways, you can pre pay your car loan and save interest money up to 40,000 rupees. Being smart and pro active towards your loan payments can help you a lot in the long run. This is how you can pay off your used car loan faster.
