5 Ways To Pay Off Car Loan Smartly

Many people wish to own a car. Many customers choose car loans when purchasing their dream vehicle. However, for many vehicle owners, car loan EMIs become burdensome after a while, putting their entire financial health at risk. As a result, some car owners begin looking for prospective buyers and sell their dream vehicles. However, with an ongoing loan, many customers are hesitant to purchase that vehicle, putting the owner in jeopardy in the first place. You can, however, avoid this situation with your car loan. Here is how to do that through some smart steps.

Choose a car that you can afford. Before you buy or even start looking for a car, always assess your affordability based on your financial strength and the recurring costs associated with the vehicle purchase. For example, if your financial situation allows you to purchase a small hatchback, don’t opt for a premium SUV that is out of your price range. You could buy a premium vehicle with easy financing, but the recurring costs would put you in trouble.

Make an extra EMI payment. Making additional EMI payments that you can afford can relieve you of the burden of a car loan in the long run. This can result in a shorter loan term and lower interest payments. For example, if your monthly EMI payment is 14,500, you can stretch it a little and pay 15,000, just 500 more. This extra payment is unlikely to put a dent in your pocket, while you pay off an additional 6,000 towards

Make a substantial down payment Make a sizable downpayment when purchasing the vehicle to keep the loan amount low. This will eventually result in lower interest payments and a shorter loan repayment period. For example, if the car costs 10 lakh and you can afford to pay half of it, pay the full amount rather than a smaller downpayment. This ensures that you only pay interest on 5 lakh instead of a larger amount. It may put a strain on your finances during the downpayment, but it will benefit you in the long run.

Part or prepayment of loan If you can prepay a part of the loan from the hike in salary or investment yield, try that. This will not only reduce the overall loan amount but also save you from paying a lot of interest, which otherwise would put a burden on your recurring monthly finance. Many banks and NBFCs provide car loans, allowing users to avail of this option. However, before opting for such an option, get it confirmed from the bank or the NBFC you have availed loan from about the penalty involved with this process. If a penalty is involved with the loan prepayment, deduct the saving you would make on interest from the penalty charges applicable on part or pre-payment. If you find the resultant saving substantial, it is worth making the part or pre-payment.

Avoid unnecessary spending. Create an effective financial plan that takes into account expenses such as house rent, electricity, food, and other necessary costs. Always make sure that your income exceeds your expenses so that you can pay off your car loans without jeopardising your financial health. Avoid unnecessary expenditures, as they may have an impact on your EMI payments.

How to avoid finance crunching car loan EMI

• Step 1 : Choose a car that you can afford
• Step 2 : Make a sizeable downpayment
• Step 3 : Make additional EMI payments
• Step 4 : Avoid unnecessary expenses
• Step 5 : Make part or pre-payment of loan