Car Loans

How To Reduce Your Car Loan Repayments

Written by:

Katie Douglass


March 25, 2021

Last updated

June 6, 2023

Reading time

5 minutes

Katie Douglass

Katie Douglass is the Communications Manager at Oiyo and a writer. In recent years, Katie’s work has appeared in publications such as Marie Claire, InStyle, and THE ICONIC. She has a Bachelor of Creative Industries in Fashion Communication & Journalism from the Queensland University of Technology. At Oiyo, Katie is responsible for overseeing editorial strategy.

Buying a car can be one of the most expensive purchases you’ll make in life, aside from a house. One way to buy the car of your dreams, without paying upfront, is taking out a car loan.

If you’re taking out a car loan, it’s important that you’re able to afford the repayments. However, there are several options you can consider to help reduce your car loan repayments. Find out what these options are in our easy-to-read guide below.

6 ways to reduce your car loan repayments

1. Balloon payment

Taking out a car loan with a balloon payment is an option that can help reduce your repayments. A balloon payment is a lump sum amount that is paid to a lender at the end of a car loan term. As the balloon payment isn’t part of the principal and interest amount of the loan, it reduces your repayments more than if you were to get a loan without one.

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Example scenario

Let’s say you purchase a $30,000 car with a balloon payment of $10,000. During the life of the loan, you’ll be paying off the $20,000 (plus interest) to your lender. Then, at the end of the loan term, you’ll pay the balloon amount of $10,000 upfront.

Keep in mind that there are pros and cons to taking out a car loan with a balloon payment. It’s important to understand a balloon payment is generally a large amount of money to pay at once. It also can come with a higher amount of interest overall. If you’re considering getting a balloon payment, take into account how you will pay it at the end of the loan term.

2. Put down an initial deposit

One way to lower your car loan repayments is by putting down a large initial deposit. This will help reduce the amount of money you need to borrow for the car loan, and therefore, lower your repayments. While saving for an initial deposit may be difficult and take a longer time, it can make your monthly (or fortnightly) payments smaller. However, you might want to consider that an initial deposit could be used for a high-interest savings bank account or towards investments instead.

3. Make fortnightly, instead of monthly, repayments

Opting for fortnightly, instead of monthly, repayments not only helps reduce the overall amount of interest you pay but also allows you to pay off the loan faster. This is because there are 12 months in a year, but there are 26 fortnights which is the equivalent of 13 months. By making fortnightly repayments, you’re adding an ‘extra month’ each year and, therefore, shortening the life of your loan without paying extra fees. This is also applicable for weekly repayments.


Some lenders may not allow you to make weekly or fortnightly repayments. So, make sure to check if you have this option before taking out a car loan.

A handy way to work out how much you can save on your car loan by changing your repayment schedule is MoneySmart’s loan calculator. Plus, you can also look at how much you save by making extra repayments.

4. Extend car loan term

Another option to help save money on your repayments is extending the term of your car loan, for example, from five to seven years. By adding extra months to your car loan, the repayments are then stretched out over the life of the loan term. While it can reduce your repayments, it also does mean you might have to pay more interest overall. This is why it’s important to consider whether the short-term savings are worth the long-term cost. Plus, not all lenders allow you to extend the term of your car loan.

5. Make voluntary extra repayments

Whether it’s rounding up your repayments or making a lump sum payment, doing extra repayments can help you pay off your loan faster. If you get extra cash from, let’s say, a tax return or bonus, you might want to consider using it towards your repayments. It can also act as a security net in the unforeseeable event that you can’t make a repayment in the future.

Alternatively, rounding up your repayments to $50 or $100 can save you interest and cut your loan term short. But, it’s important to remember some lenders may not allow you to do extra repayments without a penalty of some kind.

6. Refinance car loan

If you have a car loan with a high-interest rate, you might want to consider refinancing. Refinancing your car loan with a more competitive interest rate and lower repayments can help you save money over the course of your loan.

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Ultimately, we’re not financial advisors. Refinancing might not be a suitable option for everyone’s financial situation. So, if you’re looking into refinancing your car loan, consider consulting with a qualified financial professional before making any important decisions.

As refinancing a loan means taking out a new loan, make sure there are no sign-up or exit fees you have to pay. In addition, you want to check that refinancing your car loan doesn’t end up extending the repayment term. If you have to make more repayments, you might end up paying more interest overall.

Want to learn more about car loans?

Got a new set of wheels? Or, still on the hunt for the car of your dreams? Whether it’s a how-to guide on car loan comparisons or an explainer on chattel mortgages, we’ve got a range of helpful articles on car loans. After all, here at NODDLE, we want to help make your financial decisions a lot easier and help you get the most bang for your buck.

Check out our latest car loan articles.

Learn More

NODDLE is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.


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