You Bought a Car. Here's How to Quickly Pay Down Your Auto Loan.
When it comes to paying down an auto loan, speed matters
Amid talk of a recession and record-high inflation, you’d think Americans would keep a close eye on auto-loan spending.
And you’d be wrong.
New data from LendingTree shows the average U.S. monthly auto-loan payment stands at $644, up 11.8% from a year earlier.
Worse, loan payments for used-cars and lease arrangements are rising faster than regular auto payments, which were up 15% and 18%, respectively, Lending Tree reports.
With Auto-Loan Debt, Slow Means Trouble.Auto-loan borrowers who take their time repaying their vehicle debt are making a big mistake – over and above that rising monthly loan payment.
“A car loan is no different than any other debt in which the original sum borrowed must be repaid along with interest,” said Kunal Sawhney, chief executive at Kalkine Group, a global equity-research firm
“To emerge as a prudent borrower, one must always prioritize repaying the debt on time.”
For starters, not repaying the debt on time curbs a borrower’s ability to access other forms of credit that may be more critical, for example, buying your first home.
On the other hand, repaying a car loan faster "improves your credit score and allows you to take another loan in case of urgency as it improves your debt-to-income ratio,” Sawhney said.