If you’ve ever asked yourself, “Should I pay my auto loan biweekly or monthly?” this article is for you. You’re looking for a bad credit car loan in Alberta, and all the places offer some deal to get you to sign a contract. One option is getting your payments every two weeks instead of monthly. So, you’re asking yourself whether you should do that or not. First, let’s closely examine the difference between biweekly and monthly payments.
Biweekly vs. Monthly Payments
Whereas monthly payments are the most common type of car loan, biweekly payments allow you to spread out your monthly payments over two weeks. This means that you make two equal monthly payments, which can be helpful if you have a low credit score and have taken a high-interest loan.
Here are two reasons biweekly payments are more beneficial.
1. Saving on Interest
With biweekly payments for everyone approved car loans Calgary, buyers pay less interest and clear larger loan balances at the end of each year. People generally take monthly car loans with higher credit scores that qualify for lower interest rates. In the long run, biweekly payments are cheaper than monthly payments.
The rationale for a reduced interest is that the rate has less time to accrue before your next payment, reducing the loan balance. By paying off your loan more frequently, you’ll incur less cost for the loan duration.
2. It Gets You to the Finish Line Faster
Paying your car loan biweekly instead of monthly can help you achieve your financial goals faster. You may notice a small difference by paying off your debt twice a month instead of once. But it will help you clear the loan faster. It means your payoff f date will approach quickly without a significant increase in the amount of money you spend each month.
Should I Switch to a Biweekly Payment Schedule?
It depends on the terms and conditions of the loan contract. Even though switching to a biweekly schedule may not save you a huge sum of money, it will help you reduce your debt-to-income ratio quicker than monthly payments. But if you want to clear the loan as soon as possible, consider other ways to save money, such as refinancing and adding extra payments. If you choose this route, ensure you have cleared other debts with a higher interest rate.
The Bottom Line
Loans paid on a biweekly basis typically result in a lower finance charge. This is because making payments every other week allows an extra payment yearly compared to a monthly schedule. However, there are also some arguments against paying your auto loan biweekly and paying it off more quickly.
Biweekly payments can be a huge mistake if you don’t have the money available. Suppose you find that your cash flow needs to be tighter to make both the scheduled monthly payment and the additional amount for the biweekly payment. Then you’re adding unnecessary stress to your life.
Paying bad credit car loans in Alberta biweekly is the best option to make your car payment more manageable and reduce the impact on your finances. However, if you have a heavy debt burden or want to take advantage of the benefits of a longer-term loan, then monthly payments are usually a better choice.