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How to Pay Your Car Off Early: The Top 4 Tips

how to pay your car off early Americans owe over $1.6 trillion dollars in auto loans as of 2019. And if that doesn’t sound like a crazy amount of money, the average monthly payments for those cars are almost $600 a month. I don’t know about your area, but that’s half of a mortgage payment where I come from! In other words, cars are costing consumers and drivers almost as much as a house. Want to know how to pay your car off early? Stick with me. We’ve got some solutions.

How to Pay Your Car Off Early: The Top 4 Tips

Car loans don’t have to be a reality. Sure, for some people, a car loan may be the only thing that gets them to and from where they need to go. But let’s be honest, no one needs a $30,000 car, therefore they don’t need a $30,000 car loan. However, if you’ve already gotten yourself a car with a car loan, me telling you that you don’t need a car loan isn’t going to help you. So instead, I’m going to tell you how to pay your car off early (because that can be done!).

1) Pay More On Your Car

Pretty simple right? When you think of how to pay your car off early, the first answer should be to pay more on the car every single month. Now, you can do this a few different ways:

  • Pay bi-weekly instead of monthly – If you get paid bi-weekly (or even weekly/semi-monthly) you should be able to set up your payments to come out every two weeks instead of once a month. In other words, you’ll pay half of your car payment every two weeks. How does this help you? Well, if you calculate how many weeks we have in a year, it technically makes up an extra month. So instead of 12 payments a year on the car, you’ll actually pay 13. That’s one extra payment every single year,  and it doesn’t even have to affect your finances.
  • Throw bonuses and your tax return at the loan – Yep, I’m telling you to throw any extra money you get at a car loan. Will it suck? Yes. Could you treat yourself with this money instead? Of course. Is it worth it to pay off your car loan early? YES! So throw the extra money towards the loan. And make sure the bank is applying the money towards your principal and not interest. 
  • Round up payments – Let’s say you take out a car loan for $15,000, at a 5% interest rate. You take out the loan for 60 months, and your monthly payment would equal out to about $283 a month. But, if you round that payment up to $300 a month, you could actually pay off the car in 58 months. And if you decided to round that number up to $350? You could pay the car off a whole year early. That’s only an extra $63 a month, but it saves you a year of interest and also shows you how easy it is to pay off the car early, with only a few extra bucks a month.

2) Don’t Skip Payments

Did you know that some lenders allow you to skip a payment every once in a while? They usually do this if you’re experiencing financial difficulties and you’ve paid on time leading up to needing to extend a payment.

However, if you want to pay your car off early, you should never use this offer. While it may seem like a good idea at the time, in reality, it pushes back your payoff date even longer than a month! Why? Because the loan is still accruing interest.

I get it, times can get hard. But, if anything, I’d rather you pay the loan a little late and suffer a small penalty than have to pay more interest (and have an extra payment down the line) just because you skipped a payment.

how to get the best deal on a used car3) Refinance The Loan

I only recommend this if you follow one simple rule; keep making the same payments. And here’s what I mean by that.

If you got a car loan during a time…

  • where your credit wasn’t that great,
  • you already had an upside-down loan, or
  • you needed to establish credit history…

…most likely you didn’t get a great deal on interest rates.

But, once you’ve paid so much on the car, or made a certain amount of payments, you typically have a chance to refinance your car loan and get a better interest rate.

If you do find out that you qualify and can refinance, do it and get a better interest rate (as long as the monthly payments lower as well)! However, keep in mind that this will typically restart the loan (thus extending your payments). The best way to get around that? Keep making the same payments.

So for example, if you were paying $400 a month, but you refinance and now only have to pay $280 a month, you should still continue to pay $400 a month. That $280 seems really tempting to drop down to, but all it does is extend the time that you have a car loan. And it also means more interest paid towards the car. Instead, keep making the same payments and pay the car off early at the reduced interest rate.

4) Side Hustle

When I was broke and had a car loan, I hated every second of it. It was the first and only car loan I’ve ever had, and I had to have it because I needed a way to get to school and my three jobs. I couldn’t just not have a car.

But, I knew that I didn’t want to keep owing money on something that was just losing its value. So, in addition to my three jobs, I picked up as many side hustles as I could, and threw all of the extra money (besides the money I withheld for taxes) towards the car loan.

It was awful…

  • I was tired,
  • broke, and
  • I really hated the fact that I owed the bank money.

…But little by little, that $10 here and $30 there really did add up. After looking at how much extra I had paid each month to get the car paid off, I realized those side hustles helped me pay an extra $200-$300 a month on the car, and helped me pay the car off a good two YEARS early.

Related: How to Find High-Paying Side Hustles. Work Less and Earn More!!

You Can Side Hustle

I get it, you’re busy. But you’re never too busy to get yourself into a better financial situation.

Even with three jobs, a kid, and school, I managed to side hustle just enough to pay a few extra hundred dollars to my car loan. Again, I was absolutely exhausted. And during that time, I felt like giving up plenty of times. I thought “Well everyone has a car loan so maybe this is just a way of life”.

And in reality, that’s not true.

It is possible to live without a car loan. Sometimes you just have to make sacrifices to get to that point. And I have to say, it feels good not having to pay the bank $300+ dollars every month for a depreciating asset.

A side hustle is really just a way to get extra money in your spare time. For me, I did…

  • surveys,
  • wrote articles,
  • babysat,
  • sold items that my family didn’t need or want,
  • I also did focus groups when I could,
  • donated plasma, and
  • I even took on extra work projects in my spare time to earn bonuses.

The key was that I found side hustles that were easy and that I enjoyed. So if you plan on doing this, make sure you do the same.

How To Pay Your Car Off Early: In Conclusion

See? It is easier than you thought to pay your car off early.

You don’t need special powers to pay it off early. Just some hard work, a few sacrifices, and the ability to know that you can own a car outright. By following these tips, you could shave months off your car loan, and eventually be car loan free!

Have you been looking into how to pay your car off early? What do you think? Are you ready to pull the trigger??!!

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AUTHOR Kimberly Studdard

Kim Studdard is a project manager for online entrepreneurs and small businesses. When she isn't spending time with her daughter and husband, or reading her growing pile of horror books, you'll find her working on her HR degree and working towards FIRE.


  1. Hi. Question for my son. Long post… I know what I’d do but, let me ask a financial guy. My son recently left the military. He has a wife and child. Currently living in the basement of his dad’s home. His dad will be putting his house on the market and where this home is at, wont take long to sell. So, my son has no other debt except for a car loan. He has 3 more years to pay on it. At the current time, he has approximately $11,000 in savings. Savings he can get in a couple days. His tax return will be approximately $5K. His car loan balance is about $8300. I say to pay off the car loan after his tax return is safely in his bank account because he’d be just shy of where he started in his savings. His dad says he doesn’t think he should pay off the loan. He says it’s better to use somebody else’s money when there is much left for him anyway. If he were to find an apartment/house for $1000 a month plus cell phone, utilities and car insurance, he’d be left with $50. I say pay it off and that will be $300 in his account instead of the bank. $50 plus car payment of $250. To me, it’s a no brainer. Feel free to elaborate 🙂 I’m always always looking and reading about personal finance. So much so, that my husband and I expect to pay off a 15 year mortgage in less than 5 years. We have a maximum of 24 payments to go!!!!

    • Hi Tina. So great to hear that you and your hubby are making so much progress on your finances! Invest while paying off that house and you’ll be in great shape later in life!

      As for your son, I would recommend that he first get an apartment and figure out his new budget – then pay off the car once he knows he’s got positive cash flow. I’d just hate to see him get out of debt, then not be able to make ends meet and rack up credit card debt all over again. So, definitely pay off the debt, but have a solid plan in place to do so!

      Make sense? Thanks for reading!!

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