How to Reduce Your Monthly Car Finance Payments

If your circumstances have changed and you’re looking for ways to reduce your monthly car finance payments, there are a few options for you. Similarly, if you’re looking for a new car finance agreement and want to know how you can find the lowest payments, there are steps you can take to secure cheap car finance. Read on to find out how you can reduce your monthly car finance payments.

Extend your car finance loan

One way you can lower your monthly car finance payments is to extend the loan period. If you haven’t yet bought the car or entered into a car finance agreement, look at how much it would cost to pay the loan back over a longer period. Typically, car finance agreements can be for between one to five years. Paying your loan back over five years will mean much smaller monthly payments than paying the same amount back over two years.

If you have already entered into an agreement, you should speak with your lender to see if extending your loan period is possible. Some lenders will be open to extending the loan, especially if your financial circumstances are making it difficult to repay the loan. However, in this case, interest rates may increase, and you may end up paying more over the period.

Improve your credit score

Improving your credit score can help you to access the best car finance deals. Your credit score is an indication of how you will be able to repay the car finance loan, so improving the score means you can get better interest rates, and so, lower monthly payments. You should aim to pay your bills on time and pay off any outstanding overdue payments. Once you have improved your credit score, you should look again at the car finance deals available to you.

You can read about your credit score and car financing in our Why is My Credit Score Important When Buying a Car guide.

Refinance the loan

A way to reduce your car finance payments when you have already entered an agreement is to refinance the loan. If you can find a loan that has lower interest rates, you’ll likely find that your monthly payments will be lower. This will be especially true if you have improved your credit score since you entered the initial loan agreement.

You can refinance the loan with your current lender or with a new one. A new lender can pay off the loan on your behalf as part of your agreement with them.

However, you should check the terms of your original loan agreement. There may be an early settlement figure that you have to pay, which could mean you end up paying more overall.

Overpay your car finance

If you come into extra money you can use them to pay off your car finance. Most car finance agreements will allow you to make overpayments when you need and even pay off your agreement early (although this may come with an early settlement fee). Paying off your car finance agreement when you have the extra funds will usually mean you can lower your monthly payments as you will owe less overall.

Voluntarily terminate your agreement

If you are in a car finance agreement and you are struggling to make the monthly payments, you may be able to voluntarily terminate the agreement.

You’ll only qualify for voluntary termination if you’ve paid off more than 50% of the total car finance amount, which will include fees and interest, as well as the scheduled repayments. If you haven’t yet paid 50% of the total back, you can still voluntarily terminate the loan by paying off the amount that’s left to reach 50%.

If you choose this option, you will have to hand the car back to the dealer. You won’t be entitled to any money back if you have paid over 50% of the total. However, it can be a good option if you no longer need the car and don’t want to make the payments.

Speak with your lender

If you aren’t sure what the best way is to reduce your monthly payments, you should speak to your lender. They will be able to take you through the options available to you, to help you lower your payments.

Getting car finance is easy with GetCarFinanceHere. Our team will find you the best car finance deals from our network of lenders and we can even help with bad credit car finance. You can apply for car finance online today.