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How to pay off a car loan faster

19 October 2023
• 3 minute read
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A Great Southern Bank Car Loan is a convenient way to get your hands on a new set of wheels when you don’t have the cash up front. Whether you’re interested in a secured or unsecured loan, or one of our new green car loans for electric vehicles, you’re certain to get a competitive interest rate and a host of features to help you pay it off faster.

In fact, it’s the paying it off faster bit that we’re focussing on in this article. Because, contrary to what you might believe, paying off a car loan early won’t just save you time, it could also save you a pretty decent chunk of petrol money. How so? Read on!

Round up your repayment figure

One of the most straightforward ways of paying off a car loan early is simply to ‘round up’ your repayment figure. So, for example, if you took out a $25,000 car loan at an interest rate of 5% p.a. over five years, your monthly repayment amount would be $472. If you rounded that figure up to $500, not only would you pay the loan off three months sooner, but you’d also be saving in the region of $213 in interest.

Pay weekly or fortnightly rather than monthly

There are 12 months in a year but 26 fortnights. This is where the inconsistency of the calendar is your friend.

To revisit our example above, if you were paying back a car loan at $500 a month, that would amount to $6,000 per year. But if you were to pay $250 a fortnight instead, you’d end up paying $6,500 er year. That additional $500 a year is effectively an extra repayment, allowing you to pay off your car loan faster.

Throw any unexpected windfalls at your car loan

An unexpected windfall could come from anywhere. It might be in the form of a work bonus or tax return. Or perhaps grandma had more savings tucked away than anyone knew. If you commit to throwing any such windfalls at your car loan, you never know how much quicker you might be able to pay it off. Just make sure your loan allows you to make fee-free extra repayments (hint: ours do!).

Refinance your car loan

As with any form of debt consolidation, refinancing a car loan can help you pay it off quicker. However, there are a few things to be wary of. Firstly, are there any early payout fees or penalties for cancelling your current loan contract early? These fees won’t stop you from refinancing, but it’s a good idea to add them to the cost of refinance to avoid paying more than you expected.

Something else to consider is the time left on your current car loan. A lower interest rate is the most popular reason for refinancing, but to get the savings you’re seeking, it’s important to keep within your current loan term. A longer term might mean lower repayments, but you’ll pay more in interest over the life of the loan.

And then there’s the value of your car. If it’s less than you owe on your loan, a lender may deem it too risky.

Ready to pay off your car?

Once you’ve taken all this into account, it pays to think about the features of any new car loan you might be considering. Snagging a lower interest rate is great, but you can further reduce the time it takes to pay it off if your new loan offers things like fee-free unlimited extra repayments, flexible repayment options (e.g. weekly, fortnightly or monthly), and no early payout fee.

All these great features are available on a Great Southern Bank Car Loan.

But don’t just take our word for it, take our car loan calculator for a spin. As well as showing you how the repayment amount would vary depending on the loan term and repayment frequency you select, it can also help you compare car loans and see if we can offer you a better deal. But if for some reason we can’t, you can always employ the tips above to pay off your current car loan early and save yourself a tidy sum in interest.

Important Information

Great Southern Bank, a business name of Credit Union Australia Ltd ABN 44 087 650 959. AFSL and Australian Credit Licence 238317. Conditions, fees and charges apply. This is general information and does not take into account your objectives, financial situation or needs.  Consider the appropriateness of the information, including the Terms and Conditions (T&Cs) booklet, before acting on it. The Financial Claims Scheme may apply to this product; refer to the T&Cs for more information.

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