Tips for managing your monthly car payments

Quick insights

• Managing your monthly car payment starts with budgeting for your purchase before you've signed on the dotted line for financing.
• Automatic payments add a level of convenience when managing your monthly car bill.
• After you have a good handle on your monthly car payments, you may be able pay more and repay your auto loan early.

Monthly payments don't have to be a headache you feel each time the due date approaches. Here are several tips to manage your monthly car payments.

How to manage your monthly car payment

You can make paying off your car loan month by month a manageable feat in several ways.

Stick to a budget

When preparing to buy a car, a critical step is setting a budget so that you can later manage monthly payments. Aim to keep your car payment and insurance premium within a reasonable range, considering all your monthly bills and expenses. You can use a car loan calculator to determine a loan amount and term that fits within your budget.

Set up autopay

Automatic payments add a convenience factor when repaying an auto loan. Your checking or savings account number and the financial institution's routing number may be all your lender needs to set up automatic payments. Then, you can typically set payments to occur on the same date each month, or even more frequently, if your objective is to pay your loan off early.

Work toward early repayment

Aside from delight of having one less debt, repaying your auto loan early saves money on interest. Here are two ways you could pay off your loan earlier than originally planned:

• Pay more than your monthly minimum: If you have a simple interest loan, extra money beyond your monthly minimum payment can be applied toward the principal. Any amount you can spare that's greater than your monthly minimum payment helps.
• Refinance your loan at a lower rate: Lowering your interest could allow you to budget toward early repayment. Not all lenders offer refinancing, which replaces your existing loan with a new one.

When considering early repayment, contact your lender first. Sometimes a pre-payment penalty is part of your loan agreement and would be charged if the loan is paid before the original end of the term.

In summary

Taking out a car loan and making payments on it can seem like a quite the endeavor. It will be more manageable if you stick to a budget for your initial purchase, pay regularly (or automatically) and take steps to reduce your principal. One day, managing your monthly car payment will pay off—your loan, that is.