Most people simply pay their car payment each month and don’t give it too much thought. For those who are able, however, paying a little bit more on the car payment each month might be a good idea. For those with a low credit score when purchasing a vehicle, there are a few good reasons to make larger than required payments each month.
Pay Off Vehicle Faster
The payments are designed to be paid off over a certain period of time. If someone can pay a little bit more on every payment, they will pay off the vehicle much faster. Even paying an extra $20 per month can add up quickly, depending on the cost of the vehicle and the amount they’re required to pay each month. Depending on the terms of the loan, paying it off faster may also enable them to save money on interest, reducing the total cost of the vehicle.
Build-in Extra Months in Case of Emergency
Emergencies happen. It’s a good idea to be prepared for them as much as possible. By paying extra on the loan each month, the buyer will be ahead of their payments. If an emergency does happen and they need to miss a payment, it might not be such a big deal because they’re ahead. It is still a good idea to pay that month as soon as possible and to let the lender know what is happening, but this could build in a cushion in case there is an emergency.
Improve Credit Faster
Financing a vehicle can help boost credit scores on its own. When the vehicle is first financed, the loan appears on the buyer’s credit statement. When they make higher than the minimum payment, the loan amount is reduced faster, allowing their credit score to increase. Those who pay off the vehicle faster by making more than the minimum payments will see their credit score improve much faster.
If you’re in need of a new vehicle, it’s possible to get financing even if you have a poor credit score. Indirect auto lenders like Consumer Portfolio Services can help. Once you have the loan, work on trying to pay more than the minimum amount so you can pay off the vehicle faster and boost your credit score.