880 Walkers Line, Burlington, ON, L7N 2G2
My Garage

How to Pay off a Car Loan Faster in Canada: 3 Helpful Tips

How to Pay off a Car Loan Faster in Canada: 3 Helpful Tips

There was an expression that there are two types of debt, good and bad debt. We believe that too much of anything can lead to problems, and this includes debt. This brings people to ask whether they should pay off a car loan faster in Canada or keep it as good debt.

 

While everyone has financial obligations, owning a car is a necessity in Canada, but it doesn’t come cheap.

 

 

A depreciating asset that incurs interest every month

 

When you buy a house, its value of it will hopefully increase or appreciate over time. While you are paying interest on the mortgage, you stand to see a return on that investment when you sell the house in the future.

 

With a car, you start losing money the moment the vehicle drives off the car lot. Cars are not assets, at least not in the technical sense.

 

They lose value or depreciate in value, so if you try to resell the car, you will get less money than what you paid for it; plus, you must service the car loan with interest on top! This is why in most cases it's a really great idea to pay off a car loan faster in Canada.

 

Car depreciation over the years

 

Squeezing the most out of your budget

 

With inflation at the highest rates it has been in a generation; you need to start looking at ways to stretch your budget.

 

If you are using streaming services for entertainment, consider canceling those services.

 

They were necessary during the pandemic when everyone was forced indoors; now that we are getting back to a new normal, you should be spending more time outside.

 

The time you spend consuming content on these streaming services can be used to increase your income by taking on a side hustle.

 

With the economy headed towards a recession, you need to have more than one source of income to protect yourself from a sudden financial shock.

 

One option is signing up as a Door Dash delivery person; depending on where you live and how you manage your time, you could be making well over $20/hr, plus developing time management skills in the process.

 

Sign up for RRSP program at work

 

Most employers in Canada have an RRSP program for their employees; if you have one, sign up for the RRSP withdrawal to have payments deducted from your paycheck.

 

This lowers the amount of tax you pay each pay period; this means there is more cash in your pocket that can go towards paying down your car loan.

 

Another benefit of participating in the RRSP is being able to use the tax refund in February to knock down your car loan even further.

 

By reducing the amount of money you owe on your car loan, your credit score is going to increase, which will help you save money the next time you need credit.

 

You just need to make sure that you stay focused on paying off your car loan faster in Canada being a debt-free car owner as soon as possible; your wallet will thank you over the long term.

 

If you need help or advice on anything to do with electric vehicles, contact Car Nation Canada to get pre-approved today, we can help!

Categories: News

Tags: ,