How to Save Money on Car Loan?
Key Points
- Compare different car loan lenders before applying.
- Get the vehicles that are cheaper and affordable.
- Lack of financial planning increases the burden for drivers.
What is a car loan?
A car loan is a sum of money consumers borrow to purchase their dream car. Many people apply for car loans when they need money for transportation, but not all are aware of what it entails or how much interest rates could be on these types of loans. In a standard loan agreement, The borrower will be charged interest if they fail to pay in time, which can add up fast!
According to statistics, the car is the most common form of transportation for people in Malaysia, with nearly 61% owning one. As of April 2020, there were 31 million units registered and an estimated population count of up to 32%.
Buying their first car is an exciting but daunting process for many people. The costs of owning a car are costly and add up quickly. Not only is the price of a vehicle high, but you should also consider the insurance, gas prices, and regular maintenance going to be spent.
Unless you can buy it at the total price, you may be looking into getting a loan to purchase your dream vehicle. However, is it worth getting a car loan? Think about how many people are trapped in car loans and unable to build their wealth.
Indeed, car loans are often upside-down, which means you owe more than your vehicle is worth. This happens because of how quickly cars depreciate; with a seven to nine-year loan term, this can add up! The good news is there are various ways to pay off your car loans faster, so you can save money. Let’s have a look at it.
1. Compare different quotes
It’s essential to do your research when looking for a car loan. You may not know that there are different rates and terms available, but with more options, you can choose the best one for yourself! It also helps if we take some time comparing these prices. This is to not regret what could’ve been done differently or how much costlier it was compared to other loans offered.
2. Shorten loan tenure
The amount of time you have to repay your loan is called “tenure”. With so many different car loans out there, it can be a challenge to figure out which one is going best for your needs. No matter which car loans you choose, you should try to prevent longer loan tenure.
In Malaysia, you can take out a car loan for as little as 1 year and up to 9 years. Depending on your desired loan amount with its associated interest rates will determine how much monthly repayment must be made! The shorter the loan tenure, the more you need to pay monthly.
Of course, you can choose to extend your loan tenure to a maximum of 9 years and pay less monthly. However, with the interest rate added up, you will realize the total amount you paid for your vehicle is over the market value. This is not worth it, especially when your car depreciates over time.
If your interest rate is high, don’t extend the term just to lower monthly payments! You might end up paying more in total!
3. Get an affordable vehicle
People might think this is funny to list out as a tip. In fact, nowadays, people would prefer to buy cars that are over their affordability. We have become a society drowning in debt, which needs to stop. Some so many people can’t seem to get out from under their financial gripes. Especially when you extend your loan tenure, you might feel like getting an expensive car is acceptable. This only works if you do not have any commitment or a saving habit.
However, if you need to pay off your car loan quickly, getting an affordable OR cheaper vehicle is a better option. Do not get persuaded by a car dealer into buying an expensive vehicle. It will only increase your financial burden.
4. Increase down payment
The minimum down payment for a new car is 10% of the total price, and you will need a minimum 20% down payment for used cars. Under a special loan scheme, you can borrow a 100% car loan when purchasing your dream car.
It can be tempting to take out a large loan when you first buy your car, but this may cost more in interest. Even though larger loans might come with lower rates of return, overall, you will pay more.
5. Pay your payments on time
If you are considering skipping a payment, think about the consequences. Missing payments will increase your interest rate and extend repayment terms which means that more money goes straight into lenders’ pockets instead of yours!
6. Increase monthly payment
Instead of paying the recommended amount, make an extra monthly payment on your car loan. This way, you can help repay it quicker and save some money in interest fees! Although you need to pay more monthly, it will shorten the loan tenure, thereby paying lesser in overall payment.
7. Have a good financial planning
This include:
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- Saving habits
The key to saving more money is taking steps towards your goal. You can save 10-20% of your total salary every month. With enough savings, you can pay more for the down payment, hence shortening your loan tenure. Besides that, it can be used as an emergency fund. If you need to spend for other things, it will ensure your monthly repayment will not be affected.
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- Learn to Invest
Besides working hard for your current job, you should consider investing in the stock market, cryptocurrency etc. Passive income is a type of income that can be earned automatically even if you did not actively work for it. All you need to do is research
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- Reduce Expenses
One of the easiest ways to get ahead financially is by cutting off other monthly budget expenditures. This will allow you plenty more income which can then be used towards your car payment!
8. Get a car insurance
Although this does not directly help reduce your car loan, it does reduce your burden of yours if a car accident happens. If your car is involved and destroyed, you can receive reimbursement that could cover the market value of your vehicle.
Visit here to get the best quotation for your car insurance today!
Verdict
Figuring out how to pay off your car loan faster is figuring out what you’re willing and able to do. Putting some extra money towards the debt each month can help get rid of it quicker!
Don’t rush the process if you want to save money on your car payments or just need some advice. Take time and weigh every option carefully before making any decisions. This will ensure that they are truly what’s right for YOU! Click here if you need more information about car loans.
