How does a year worth of free auto insurance, a year worth of gas or free Starbucks coffee for the entire year including tips sounds to you? If that does not appeal to you than maybe a trip for two to Hawaii would be more to your liking. Yes it is true that you can save yourself quite a bit of money simply by switching the frequency of your auto loan payment. So instead of paying your car payment once a month like the rest of the world do, you should have the financial institution where your loan is currently housed at change the frequency to either weekly or biweekly payments. It is most likely that you already have your monthly payment in your account already so why not set it up to draw on more frequently? I will discuss this in further details to explain the benefits of switching your current car loan frequency with actual figures and number to support my point. Of course you will have to keep in mind that savings will vary in every case depending on the following variables: loan amount, interest rate, monthly payment and the terms of the loan.
For our example we will use the following figures:
Loan Amount: $30,000.00
Interest Rate: 10%
Monthly payments: $498.11
Term: 7 years or 84 months
With the above example our current monthly loan payment is $498.11 which will have to be paid for a total of 84 payments to payoff the entire loan which is 7 years. The total interest you will have to pay for the duration of this loan is $11,840.67. Click here for a full monthly calculated payment schedule. As you are looking at the payment schedule you may notice, with every payment that’s made more of the payment is being put into the principle and less into the interest.
On the other hand if you switch the frequency of your payment to Bi-Weekly on your existing loan above you will pay less interest. The new payment will be $249.06 ($498.11/2=$249.06) which will be paid twice a month, on this payment schedule your total interest that you will pay will be $10,330.64. Click here for a full bi-weekly calculated payment schedule. Your total savings computes to $1510.03 on this payment plan which is equivalent to 9 months of payment savings.
This chart shows the savings when comparing the two payment schedule between monthly and bi-weekly.
The above graph illustrates the total interest savings.
Now if you want to go as far as setting the payment schedule to weekly, the savings will be an additional $38.57. The savings is not as significant but never the less it is a savings just by doing nothing more than switching the frequency of the payment. Click here for a full weekly calculated payment schedule.
As promised you have made an instant savings on your car loan without getting a raise or earning more income. Now you can use the money to spend on better things…yourself! Please give me your feed back on the article. Thank you and I hope you have enjoyed this article!
