Car Loan Payments – Gain Control & Save Big (2026)

Are you currently locked into a car loan and wondering if making additional payments could help ease your financial burden? You're not alone. Many Australians are looking for ways to reduce their car loan balances faster, save on interest, and ultimately own their vehicles outright sooner. Understanding how additional payments work and whether they are allowed under your current loan agreement is crucial in making informed financial decisions.

Understanding Additional Payments on Car Loans

Additional payments on a car loan refer to sums of money paid over and above your regular monthly instalments. These extra payments can significantly reduce the interest you pay over the life of the loan, as interest is calculated on the remaining principal balance. However, not all car loans are structured to allow additional payments without penalties. Therefore, it's essential to grasp the terms of your loan agreement and understand the implications of making extra contributions.

Current Market Information and Options

As of 2026, the Australian car loan market offers a variety of options with interest rates ranging broadly from 6.49% to 12%. These rates depend on factors such as your credit score, the term of the loan, and the type of vehicle you are financing. It's also crucial to consider whether your car loan is fixed or variable, as this can affect your ability to make additional payments. Esteb and Co, with access to 83+ lenders, can help you navigate these options to find a loan that suits your needs.

Lender Type	Interest Rate Range	Additional Payment Flexibility
Bank	6.49% - 9.5%	Usually allows additional payments
Credit Union	6.89% - 10%	Often more flexible with extra payments
Online Lender	7% - 12%	Varies, check specific lender terms

Steps to Make Additional Payments on Your Car Loan

Making additional payments on your car loan can be a straightforward process if you follow these steps:

1. Review Your Loan Agreement: Carefully read your loan terms to understand if additional payments are allowed and whether there are any fees associated with them.
2. Contact Your Lender: Reach out to your lender to confirm the process for making extra payments and to clarify any uncertainties.
3. Calculate Your Budget: Assess your financial situation to determine how much extra you can comfortably pay each month without straining your budget.
4. Make the Payment: Use the preferred payment method stated by your lender, whether it's through online banking, a direct debit increase, or another method.
5. Track Your Progress: Regularly monitor your loan balance to see the impact of your additional payments and adjust as necessary.

Tips and Considerations

• Assess Penalties: Some loans might have penalties for early repayment or additional payments, so it's important to weigh these costs against the interest savings.
• Regular vs. Lump Sum Payments: Decide whether to make regular additional payments or save up for a lump sum payment, depending on your cash flow and financial goals.
• Consult with a Broker: Speak with a mortgage broker, such as those at Esteb and Co, to explore refinancing options if your current loan terms are not favourable for extra payments.
• Focus on High-Interest Debt: If you have multiple debts, prioritise paying off those with higher interest rates first for maximum financial benefit.

Frequently Asked Questions

• Can I make additional payments on any car loan? Not always. It depends on the terms of your loan. Some loans allow extra payments without penalties, while others may not.
• How do additional payments affect my loan? Extra payments reduce the principal balance, which can lower the total interest paid over the life of the loan and shorten the loan term.
• Are there penalties for making additional payments? Some loans impose penalties for early repayments or additional payments, so it's crucial to check your loan agreement.
• Can I refinance my car loan to allow extra payments? Yes, refinancing might be a viable option if your current loan restricts additional payments. Consulting a broker can help you find better terms.
• How often can I make additional payments? This varies by lender and loan terms. Some lenders allow unlimited extra payments, while others might have restrictions.
• Should I pay off my car loan early? Paying off a car loan early can save you on interest, but consider any potential penalties and whether those savings outweigh the costs.