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How to Reduce Your Car Loan Repayments
February 25, 2021●
3 minute read●
Financing a new car can be expensive, especially if the car is brand new. To reduce your monthly car repayments and, ultimately, the cost of your loan, these are some tips on how to reduce your car loan repayments.
Improve your credit score
If you have a good credit score, you have more room to negotiate your terms. Lenders are likely to be more flexible in terms of interest and other fees for borrowers with good credit, as they are considered less risky to lend money to. If you have bad credit, you can still access car finance, but your options will be more limited. There are things you can do to improve your credit score over time. Some of these include:
- Pay all of your credit card and loan repayments on time
- Keep your credit card debt low
- Avoid applying for multiple loans at once
- Avoid taking on more credit until you settle your current debts
You can access a free annual copy of your credit report through any of the credit reporting bureaus such as Equifax, Illion and Experian. It is important to know your credit score and check your report regularly, to know your options and ensure there are no discrepancies or mistakes on your report. If you find mistakes, contact the credit bureau immediately to amend this.
Add a balloon payment at the end of your loan
A balloon payment also referred to as a lump-sum payment, is a large amount that is owed at the end of your loan term that is paid in one payment. The large lump sum reduces the regular monthly repayments you will pay, as there is less money to repay in these instalments. It also coincides with the time you may choose to either trade the vehicle in and receive cash for it, which you can use to pay off your loan.
Save for a large car loan deposit
The more money you put down as a deposit, the less you will need to borrow. This will mean lower monthly repayments and lower interest. It also demonstrates to lenders that you can responsibly manage your money through saving, which will make you a more favourable applicant.
Stretch out your car loan term
If you choose to repay your loan faster, you will likely have larger repayments due. If you choose a longer repayment term, you will have less to pay in your instalments and therefore lower repayments. However, this can end up costing you more in interest and monthly fees. This will depend on your agreed interest rate and monthly fees.
Refinance your car loan
If you are currently paying very high repayments, you may wish to consider refinancing. This will depend on your current agreement and whether there are existing exit fees, as well as any sign up fees with your new lender. You should do some research to decide whether these potential costs will outweigh a lender with a lower interest rate and monthly fees.
If you are currently receiving your bills in the mail, traditional lenders like banks and credit unions will often charge fees for this. Avoid these fees by going paperless and access all of your bills completely online.
Car loans with Jacaranda Finance
At Jacaranda Finance, we offer competitive rates on our new and used car loans. We provide loans from $5,000 to $35,000 to be repaid over 1 to 4 years. We are a completely online lender, which means that you won’t have any fees for bills in the mail. Everything from your application, approval and repayments will be handled 100% online. We can also offer refinancing options on your existing car loans and bad credit car loans.
For tips on buying a car safely, read our latest blog.
Written by Jacaranda Team