So you've decided to trade in your old car and upgrade to something more snazzy. Smart move. And what's that? You're using car finance to fund your new wheels? Well look at you, making wise decisions to get the keys to the whip. More than 85% of people buy a car with finance, so you're not alone, and it just goes to show how popular finance is for buying a vehicle.
But once you've started making payments, it's entirely possible that you might want to see if you can reduce the amount you pay each month. How do you do that, you ask? Read on and find out with our 10 hacks to reduce your monthly car payments.
Not all car loans allow you to overpay, and you'll be paying a larger sum in one go, but overpaying on your car loan can help bring payments down. It might be that you've found yourself with extra funds and can therefore afford to pay a bit more in one go. Doing so will see your monthly payments reduce.
2) Extend your loan
Another option to reduce your monthly car payments involves extending your loan agreement. Typical loans are anywhere between 12 months and five years, but some can be even longer. Check the maximum loan length with the lender and see if it's possible to extend the agreement before you commit to the initial loan.
3) Review options with your lender
If you would like to reduce your monthly car payments but are unsure about how to do it, you should get in touch with the lender. They will be able to advise you on the options available and can help you make the best decision to lower your payments.
4) Refinance your loan
If you have a current loan, the best way to reduce payments involves refinancing to better interest rates and lower monthly payments. By reducing the interest rate on a new loan, you can significantly decrease the amount you pay each month.
However, be careful to check the "true cost" of the loan, especially for your current agreement. It may be that switching the loan ends up costing more because of the interest rate or a possible early settlement figure.
5) Review your credit score
Your credit score plays a major role in the type of finance you're eligible for and determines which car loan products are available to you. It's worth regularly checking your score, as a higher credit score means you might be able to refinance to lower rates.
6) Improve your credit score
If your credit isn't quite up to scratch then you can work on improving your score over a few months. By paying bills on time, being on the electoral register and not having a high debt to credit ratio, you can start improving your credit score and get more access to lower interest rates products with reduced monthly payments.
7) Buy a used car
Buying a used car should mean paying lower monthly costs than you would on a brand new vehicle. You don't want to buy something really old as it might cause you problems and incur maintenance costs down the line. But vehicles that are only a few years old will still perform to a high level and will cost you significantly less in monthly repayments.
8) Bi-weekly payments
Paying your loan every two weeks – instead of monthly – could help you reduce the overall cost of your monthly payments. This is because bi-weekly payments pay the interest off faster, leaving you with a smaller amount to pay on the overall loan.
9) Shop around
There are plenty of deals out there as loan companies compete for customers. Before committing to a loan, you should shop around and compare rates to find the best deal for your needs. Comparison websites are helpful, but you should also do a few Google searches and see which options show up that might not be on comparison websites.
10) Use Carmoola
Here at Carmoola, we offer a seamless and easy to understand process to get car finance that puts you in control. Check out our calculator to get an idea of how much you could pay each month if you finance your next vehicle with Carmoola.
Reducing your monthly car payments
Fortunately, there are lots of ways you can reduce your car payments, including shopping around, checking your credit score, refinancing and, of course, using Carmoola. And once you've reduced your monthly payments, you can refocus your energy on driving your brand new car, playing some top tunes and enjoying the extra money you saved.