- Champion Financial Services
4 Tips For Paying Off Your Auto Title Pawn Early
Paying Off Your Auto Title Loans Early
Whether you needed to borrow money to afford your college tuition, make a rent payment, or start a business, there are few things more liberating than the feeling of paying off a loan. Auto title loans, also known as auto equity loans, are one of the many options available to vehicle owners who need to borrow some quick cash for any of the expenses life tends to throw our way.
What is an Auto Title Loan?
An auto title loan, sometimes referred to as an auto equity loan, pink slip loan, or car collateral loan, is a loan where the borrower’s car, truck, SUV, RV, or motorcycle title is used as collateral to secure a cash loan. The maximum loan amount is based off of the value of the vehicle. The borrower gets to keep driving their vehicle and the lender becomes a lien-holder on the car until the loan and interest are paid off.
If you aren’t able to get approved for a bank loan due to bad credit, bankruptcy, or unemployment, taking out a loan on your car, truck, SUV, RV, or motorcycle is an easy and fast way to borrow the cash you need.
Why Pay Off your Auto Title Loan Early?
The number one reason to pay off any loan early, of course, is that you will end up saving money on interest. Interest is the extra money you have to pay the lender for giving you the loan. It is usually charged as a rate, or percentage of the amount owed. Interest rates vary widely depending on the lender and the type of loan, so be sure to find a lender who will charge you the lowest possible interest rate on your auto title loan. Additionally, many reputable loan providers will not charge any prepayment penalties to those who pay off their auto title loans before the end of the loan term. On top of the financial savings, there is a huge sense of satisfaction that comes from knowing that your loan has been paid off and that you own your vehicle free and clear.
Here are a few of the top tips for those who would like to save money on interest by paying off their auto title loan early:
Round Up Your Scheduled Payment Amounts
Rounding up your scheduled payments to the nearest $10, $20, $50, or even $100-dollar increment can be a great way to pay down your loan amount so that you can save on interest and pay off your loan sooner.
Make One Big Payment Each Year
If you can afford to make one payment a year that is well above the regular amount, it can help you pay off your loan quicker and save you money on interest.
Don’t Miss Any Payments
Missing payments on a loan should be avoided at all costs as it will cause you to fall behind on your scheduled payments, possibly subject you to penalties, and will result in you eventually paying more money in interest. If you aren’t able to pay off your loan, your car could be taken away from you.
Pay More Often, If Possible
If you are scheduled to make payments on your loan on a monthly basis, try making payments of half the monthly amount once every two weeks if your lender allows. For example, if you are paying $400 a month, try splitting that payment into $200 payments every two weeks. On the months that have five weeks, you will end up paying one-and-a-half times your monthly payment, helping you pay off your loan in a shorter amount of time as well as saving you money on interest.