After fulfilling your dream of buying your favourite car, you begin to start making payments of EMIs towards the loan. A couple of years later, you could find the loan highly unbearable, making you search for an individual who could take over your outstanding balance. But to your utter dismay, you may not find anyone. You could then visit various car websites to find a prospective buyer for your vehicle. Then again, you may fail to find any interested buyer, thus raising your concerns. But you need not to worry as there are some tips that can help you pay off your car loan quickly.
Tips to Pay Off Car Loan Faster
Make Additional Payment
You can enhance your normal EMI payment by an amount affordable to you. Let’s suppose your EMI payment comes out to be INR 12,280. You can then pay off a round figure of INR 13,000 without making a deep hole in your pocket. In this way, you can pay off an additional annual payment of INR 8,640 towards your EMI and thus cut down your loan tenure and the interest outgo.
Prepayment
You can part pay the loan from the hike in emolument or investment yield you could receive while servicing the debt. This not only reduces the loan amount but also saves a lot of interest which otherwise would get paid from your end. Many banks and non-banking finance companies (NBFCs) can let you avail this option. But, before availing such an option, get it confirmed from your lender if it can result in a penalty. If so, then deduct the savings you would make on interest from the charges applicable to part payment. Check the resultant savings post deducting the charges, which can be anywhere between 3%-5% of the outstanding loan balance. If the savings turn out to be substantial, it’s worth making a part payment.
Choose the Car According to Your Affordability
Assess your affordability before choosing the car model. For example – when you can afford Ford Figo in your budget, you must buy it instead of purchasing Benz A Class that could be beyond your reach.
Keep a Lid on the Expenses
Make effective financial plans keeping in mind expenses like rent, electricity, food, etc and the incomes you have. Always ensure to keep your incomes much ahead of the expenses so that you can pay off your car loan much faster.
