Many lenders offer borrowers the option to make biweekly payments on their auto loan, rather than the traditional monthly payments. The principal behind this is that, because there are 52 weeks in the year, borrowers end up making the equivalent of 13 monthly payments, or one extra payment per year (52/2 = 26 payments; 26/2 = 13 monthly payment equivalent).
There are two main benefits to making biweekly auto loan payments. First, these extra payments decrease the term of the loan, enabling borrowers to pay off the loan in a shorter period of time. Second, these extra payments reduce the total amount of interest borrowers pay over the term of the loan, saving them hundreds, and maybe even thousands, of dollars.
It is important that borrowers check with their lender to make sure there are no fees or penalties associated with making extra payments or paying the loan off early.
If a lender does not offer a biweekly payment option, borrowers can achieve the same effect one of two ways: 1) borrowers can make one extra payment per year; or 2) borrowers can divide their monthly payment by 12, and then add this amount to all future payments.
VisualCalc’s Biweekly Auto Loan Calculator will help borrowers determine if making bi-weekly auto loan payments is a good option for them.
