If you have a high interest rate auto loan and are tired of paying on it, then this article is for you. Here are some suggestions for paying off your high interest loan and getting out from under the heavy debt. If you are in a situation where your car loan is carrying a high interest rate, you may be feeling overwhelmed with the high monthly payments. Rest assured you do have options. Do some homework and choose the suggestion that best suits your financial situation.
Know the terms of your current high interest rate auto loan.
Before taking any action, it is best to take out your car loan papers and review all the terms of the loan. Some loans will have an early pay-off penalty. Typically this will be a percentage of the balance remaining on the loan. Obtain the pay off balance either via phone or on your monthly statement then calculate what the early pay off penalty will be. You want to know this so you can make the best financial decision as how to pay off your high interest car loan.
Now having the complete picture, you have a few choices to move forward toward the goal of saving yourself money on your car loan.
One choice would be to increase the monthly payment that you send to your current lender.
Pull out all your monthly bills and take a look at your interest rates on all your credit cards. Use your own finances to reallocate money to be able to send more each month to the high interest rate car loan. If you have a credit card or two that have lower interest rates than your auto loan, see if you can send these the minimum payments and apply the extra funds to the auto loan payment. Paying the loan off early can help you save money over the life of the loan.
Another option may be in your home equity.
If you have been successfully paying your mortgage and have equity built up, you may be able to get a home equity loan and pay off the high interest rate auto loan early. Home equity loans have a much lower rate of interest than most auto loans. Some mortgage companies request that you take out the home equity loan for the complete amount of equity you have built, beware of this if it is way over what you need to pay off the auto loan. Do your best to work with the mortgage company to only borrow the balance of what you owe on your car.
There is also the option of refinancing.
If you have made your car payments on time, you may be able to refinance the high interest rate auto loan with another lender. Do your homework and see if you can find a company that will give you a lower rate on the balance you have remaining. Start with your bank. If you have a good history with your bank, they may be able to get you a lower rate of interest to finance the balance of your auto loan. If you are a member of a credit union, this may be another option. Credit Unions often lend money to their members at a much lower interest rate than car dealerships.
Using some of these ideas mentioned can help you get a loan to replace your high interest rate auto loan and save you money while rebuilding your credit.