June
21 - 2018

How to Save Money on Finance Costs

Financing is a great option for allowing you to pay for purchases over time. The catch, however, is that there is an interest rate attached. Depending upon the interest rate and how long it takes you to pay off the balance of the loan, this means that you could wind up paying significantly more than you initially borrowed. This could end up hurting you severely in the long run. Fortunately, there are ways that you can save money on your finance costs. Here’s how.

Auto Loans

If you currently have an auto loan, you can refinance it. This can be a little difficult. The interest rates often take the age of the car into account. The older the car, typically, the higher the interest rate. If you owe more than the car is actually worth, the bank may not be willing to refinance.

Refinancing an auto loan is not impossible however. Take a look at offers from different banks based on the age of the car. Or, you can ask your current bank to beat the rate you already have. It is important that you look at the terms of refinancing though. If you are lowering your interest rate, but extending the loan terms, it could completely defeat the purpose of refinancing.

Student Loans

There is a significant number of people in the United States with student loan debt. For many, this debt is high. Making payments can be difficult. There are a few different options to look into.

When you first get out of school, there is typically a 6-month grace period where no payments are due. Unsubsidized loans start accruing interest right away, meaning that you will have to make payments on more than you took out by the time the grace period ends. To avoid these issues, at least make the interest payments during this time. Even if your loans haven’t accrued interest during the grace period, it is still a good idea to make payments during this time. This can help you to save money in the long run.

You could also refinance your student loans as well. Many banks are offering refinancing options for student loans starting at low interest rates. You may be able to both lower your interest rate and shorten your loan period, which can potentially save you thousands. If you are refinancing federal loans, however, you have to be careful that you will not lose your federal protections if you do so.

Personal Loans

Personal loans can be taken out for a variety of different reasons when you need a loan, including unexpected expenses, home improvements, or for something you want to do. When shopping for a personal loan, or any type of loan for that matter, to shop around. Compare interest rates and associated fees. If you already have a personal loan, there are still ways to save on the finance costs. Sign up for automatic payments. Automatic payments take the money out of your account without you having to worry about it. If you’re pretty far into your loan and don’t have much left to pay off, consider transferring the balance to a balance transfer credit card. These credit cards usually offer a 0% interest rate for a set time frame. Just make sure that you can pay the balance off by the time the term is up. If you can swing it, you can also consider making extra payments each month or even paying the remaining balance off early. Make sure that you do not get charged for early repayment first.

Mortgages

Your home is most likely your biggest expense. The average interest for a 30-year fixed mortgage is sitting at just over 4.7%. Any savings you can get with a mortgage can add up. Refinancing your mortgage is always an option, but you need to make sure that your appraisal fees, closing costs and other fees associated with refinancing do not cancel out your decreased interest. You also want to be careful with extending the length of your mortgage. Even if you make lower payments every month, you could still end up paying more by the time the terms are over. Another thing you can do is take out a low-interest home equity line of credit to pay off higher interest loans or credit cards.

Credit Cards

Credit cards are similar to loans. You have a specific amount of money that you can use to purchase things and then you can pay them off over time. Interest rates on credit cards can be high, though. If you are only making the minimum payments and still adding more purchases onto the card, you can end up paying thousands more than the amount of the original purchases. There are a few things you can do to save on the costs of credit cards. You can make multiple payments each month, or pay more than the minimum each month. If you can, pay off the entire balance when the bill arrives. You can do a balance transfer to a card offering 0% interest, but make sure that you can pay off the entire balance before the promotional period ends. Another option is consolidating your debt with a lower interest personal loan.

While getting the lowest interest rates possible can help you to save money on your finance costs, it is not the only way. If you take the time to research your options and talk with your financing company, you might just find that you can save a significant amount of money in the end.

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