Monthly car payments can put a strain on your monthly budget, especially when you’ve opted for a shorter loan term. It can be burdening to have a loan to pay for when you could have spare money to spend on home remodeling projects or travel.

How to start reducing your monthly car payment?

The good news is that there are a plethora of ways to reduce your car payments. Take a look at these tips!

Establish a good credit history

Credit scores are an important factor for loans like mortgage and auto loans. A person’s credit score determines the terms and interest rates. Stellar credit enables a borrower to receive the lowest possible interest rate. So, if you currently have problems with your credit score, you might want to consider improving your credit score before purchasing a car. The interest rates you will be charged will affect the total price of the car and the monthly payments.

Consolidate debt

Debt consolidation refers to applying for a special loan that will merge all your current debt so that they are paid together in one monthly installment. This option is offered by banks and other financial institutions to borrowers who are overwhelmed with debt. If this is an option you are considering, be sure to prepare documents such as bank statements to submit to the lender. Also be ready with your credit report, as well as a collateral asset.

One of the good things about consolidating your debts is that it can help you keep your car from repossession. However, opting to go this route would mean very slow progress in terms of improving your credit score. It might take at least two years before you see the results of your credit rebuilding efforts.

Negotiate for longer loan terms

Shorter terms for car loans usually entail higher monthly payments. The monthly installments consist of the interest rate and the base price of the vehicle. If you do not want to be burdened with hefty monthly payments, choosing a long repayment period is a viable option. This way, the total loan amount can be broken down into smaller amounts which are more affordable to pay.

To increase your chances of success in negotiating for a longer repayment period, it would help to be ready with a sizable down payment. By paying a hefty deposit, the outstanding balance is reduced, thus lowering your monthly car payments. Also, be sure to negotiate for lower car payments as soon as possible instead of waiting for the deadline. This will give the lender ample time to make adjustments on your loan so that you don’t miss your next payment.


Refinancing a loan isn’t only available for mortgages. You can also refinance your car. This option helps reduce interest rates and thereby lower the monthly payment. It also helps consumers pay off their auto loans sooner. But how does refinancing work? In auto loan refinancing, the lender pays for your outstanding car payment in exchange for the car title. Then, the credit lender restructures your loan so that monthly payments will be lower than what you used to pay for.

Auto loan refinancing is an excellent option for those who want to save up money for other important financial goals. The nice thing about this process is that it allows car buyers to maintain their payment history from the original loan. And if you make sure that payments are made on time, it can also help boost your credit standing.

Apply for a car loan modification

Car loan modification is another excellent option for those who want to reduce their monthly car payment. With a car loan modification, the credit lender allows a borrower to temporarily pay a smaller amount. It is quite different from negotiation because negotiation tackles the terms of the repayment period. Loan modification, on the other hand, focuses on lowering interest rates.

There are several different ways to lower monthly car payments. Use this guide to help you repay your car loan on time. If you want to apply for a car loan or need information on other types of loans, please feel free to reach out to Calcite Credit Union.