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How can you pay off your car in one year?
What’s the best way to pay off a car in one year? I recently bought a car. I was able to get a 36-month loan, but I want to pay it off before my daughter goes to medical school next year since I'll be operating on a pretty tight budget. Plus, I'd like to avoid as much interest as possible.
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“It’s certainly possible to pay off your car in a year, but it will take a lot of effort and prioritization. Essentially, you’ll need to pay higher amounts and pay more often than your loan requires.
Here are a few strategies:
- Don’t skip any payments: This may seem obvious, but it’s worth a reminder. Your lender may give you the option to skip payments on your loan, but don’t. Make them as often as possible to keep yourself on track.
- Make a few large payments: You’ll want to make at least one large payment over the course of the year. If you get a big tax return or a bonus from your employer, throw it all at your car loan and watch your balance plummet.
- Round up: Rounding up your payment amount will help you get rid of the loan quicker, too. If your monthly payment is typically $327, try to pay $350, $400, or more each month instead.
- Change your pay interval: Try to pay at least half your monthly payment every two weeks. If you can, pay your entire monthly payment every two weeks. Just make extra payments whenever possible—the sooner you do, the faster you’ll watch the numbers drop.
- Refinance your loan: If you can get a lower monthly payment, better interest rates, or a sooner payoff date, you may want to refinance your loan. If paying off your car in a year doesn’t seem realistic, refinancing can help to lower your monthly bill, too.
- Look at your other accounts: While a car loan is a large investment, you may want to look at any other sources of debt to see which has the highest interest rate. Credit cards, for example, will often charge much higher interest rates than car loans, so if you’re looking to save money next year, make sure your item with the highest interest is your top priority.
A word of warning: some lenders charge a
prepayment penalty
for paying off your loan early, so paying off other debt first is a good way to avoid additional fees.Another way to save money next year is to shop around for cheaper car insurance. It’s easy to pay too much, but the
Jerry
app makes it even easier to find the best rates. Jerry will gather low-cost quotes from top name-brand insurers and deliver them directly to your phone in less than a minute—for free.”View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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