Have you ever thought of Reducing Monthly Installments when it comes to your auto loan? If you’re saving for a new home or car, you need some savings to pay for deposits. Sometimes, a national drop in interest rates creates an opportunity for you to pay lower EMIs through car loan refinancing.
Are you tired of spending too much on debts every month? Pay attention to these simple tips shared below.
9 Tips on Reducing Monthly Installments You Can Start Applying Today
1. Do a little window shopping
If you’re looking to buy a new or used car, you definitely want one that’s affordable. Apart from the actual car price, there’s interest rates and repayment durations to consider. Since you want a high-quality car that’s within your budget, it’s wise to compare auto loan terms offered by various car dealerships.
When you visit a car dealership, request for a brochure to read about their auto loan terms. Ask whether they offer discounts if you pay off your EMIs early. If you don’t like their terms, move on to the next car dealership near you.
2. Bargain before purchasing
Car dealerships and auto loan lenders determine your EMIs based on the car’s selling price. Fortunately, you still have a say on the selling price even if you’re purchasing a car using an auto loan. Bargaining helps you to afford the initial deposit. The amount of deposit paid also determines how much you pay your creditor each month.
Let’s assume you acquire an auto loan and want to purchase a new car worth $30,000. Your creditor charges an interest rate of 4.5 % and a repayment period of 6 years. If you do your auto loan calculations correctly, you’ll pay $480 per month. But, what if you convinced the car dealership to lower the price to $25,000?
If your creditor imposes the same interest rate and repayment duration, each Equated Monthly Installment (EMI) amounts to $400. Negotiating for a better price can help reduce your EMIs by 20 %.
3. Pay a huge cash deposit
Creditors make money by imposing interest charges on your EMI’s. Banks make profits whenever they receive mortgage payments every month. Auto loan lenders also rely on EMIs to generate profits. The bigger your debt, the more profit your creditor makes.
Financial experts advise buyers to pay huge cash deposits for credit purchases. Doing this reduces overall debt and as a result, you pay low monthly installments.
4. Request for a longer repayment period
When you pay the debt over a short period, your creditor charges higher EMIs than for shorter repayment durations. Short repayment periods carry higher EMIs because the creditor wants to recoup their principal plus profits within a small time frame. Longer repayment durations have more affordable EMIs because the creditor can spread interest charges across many months.
If you’re currently paying off a huge long-term debt, it’s better to request for an extended repayment period for your auto loan. This step ensures that you afford to pay off several debts simultaneously.
5. Transfer your outstanding balance to a 0 % credit card
Credit card companies don’t charge you any interest during the first eighteen months of use. Plus, if you have a huge credit limit, you can request for a balance transfer. Now, you’ll pay interest-free EMIs as long as you have less than 18.
There are a few setbacks to paying your auto loan EMIs using a credit card. Auto loan lenders charge a transaction fee that’s worth 5% of the total loan to cover merchant fees. Some lenders will also demand a full month’s installment paid up front.
6. Apply for debt consolidation
Debt consolidation is the process whereby a debt relief company converts all your long-term debts into manageable monthly installments. A credit company reaches out to all affected creditors on your behalf and negotiates with them to lower your debts. If your creditors feel convinced, the debt relief company works out a monthly repayment plan.
Debt consolidation can lower your auto loan EMIs by 30 percent. You need a good credit score to convince your creditors that you’re worthy of a second chance. While this option saves you money, it affects your credit score.
7. Avoid purchasing an insurance cover from the same auto loan lender
Some auto loan lenders also provide insurance covers to ensure that customers get everything they need under one dealership. Applying for this car insurance is more convenient compared to driving all over town comparing monthly premiums.
Car buyers who rely on their dealership’s insurance cover pay expensive premiums. You’ll spend less by visiting several insurance companies to compare premiums. Some motor vehicle insurance firms offer great discounts for the first six months to new clients.
8. Take advantage of windfalls
Once in a while, you may catch a lucky break in form of a windfall. You just won a local lottery or a deceased well-off relative left behind hundreds of thousands of dollars in your name. The wisest way you can spend your windfall is getting out of debt.
Approach your auto loan lender and request to make a lump sum payment. If you pay five installments in advance, you won’t struggle to save enough money to clear the remaining installments in another lump sum payment.
9. Request for an auto loan refinancing plan
An auto loan refinancing plan is an arrangement whereby a new creditor takes over your outstanding auto loan. Car buyers apply for auto loan refinancing because they offer lower EMIs and longer repayment periods. You can get a good auto loan without worrying about what will happen to your credit score.
Complete Auto Loans offers bad credit auto loan refinancing at affordable rates. Feel free to make inquiries today.
Cutting down your car loan monthly payments increases your net income!
Slashing your auto loan installments enables you to retain a good portion of your net income. This enables you to pay your auto loan installments on time and improve your credit score significantly. Lowering your auto loan EMIs ensures that you have enough net income every month to keep you out of bad debts.