How can I pay a car loan faster?

I am planning to buy a house in the next year. My financial advisor said I need to work on getting my debt-to-income ratio down. I have a car loan and I want to pay it off faster. How do I do it?

Since debt-to-income ratios are one of the major factors of mortgage acceptance, reducing it can work in your favor.
Paying off your car loan faster is one way to facilitate the process. But before you decide to pay your loan off, start with higher-interest debt like credit cards. This will lower the amount of interest you pay while also improving your debt-to-income ratio.
Once you pay off your credit cards and other debt, follow these tips to pay off your car loan debt more quickly:
  • Pay more every month. One option is to pay more than your monthly payment every month. Anything above your car payment should go towards your loan’s principal balance, which means you pay it off faster and save money on interest.
  • Make a one-time payment. If tax time is near, consider using your tax refund to pay off part of your loan. Making a large payment every year can reduce your principal balance and lower your debt.
  • Use the snowball effect. A method to pay off debt faster is the snowball effect. With it, you begin using extra funds to pay off your smallest balance first while paying the minimums on the rest of your debt. Once you pay off your smallest balance, use that money towards paying the next highest. Depending on the amount of debt you have, you could potentially pay off a large majority of it and your car loan faster by managing your finances.
Another easy way to cut costs is through your car insurance Use the Jerry app to collect quotes from top insurance providers in seconds. The average Jerry customer saves $879 a year, meaning a lot of extra cash can go toward your loan!
Emily Maracle
Answered on Oct 25, 2021
Emily Maracle is a car insurance specialist living in New York. Originally from the Pacific Northwest, she has a degree in English Literature and a background in customer service. She enjoys cooking, gardening, and living sustainably. In the future, she can't wait to upgrade to a hybrid or electric car.

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