Car Loan Payments? Here's How to Gain Control Fast

Are you feeling burdened by your car loan repayments and wondering if there’s a way to alleviate some of that financial stress? Many Australians find themselves asking, "Can I make extra payments on my car loan?" The good news is that the answer is often yes, and doing so can save you money on interest and help you pay off your loan faster. But before you dive in, it’s crucial to understand the ins and outs of making extra payments on a car loan and how it can benefit you.

Understanding Extra Payments on Car Loans

Extra payments on a car loan refer to any amount you pay over and above your regular scheduled instalments. These can be one-off lump sums or additional amounts included with your regular payments. The primary goal of making extra payments is to reduce the principal balance of your loan, which in turn decreases the amount of interest you pay over the life of the loan. This can lead to paying off your car loan sooner than planned, freeing you from debt faster.

Current Market Information and Options

In 2026, the Australian car loan market offers a variety of interest rates and loan options. As of now, typical car loan interest rates range between 6.49% and 12%. However, these rates can vary based on the lender, your credit score, and the loan term. When considering making extra payments, it's essential to check the terms and conditions of your loan agreement, as not all lenders allow for penalty-free extra payments.

At Esteb and Co, with our access to over 83 lenders, we can help you navigate the diverse options available and find a lender that suits your needs, especially if you’re looking to make extra payments to reduce your financial burden.

Steps to Make Extra Payments on Your Car Loan

Making extra payments on your car loan can be straightforward if you follow these steps:

1. Review Your Loan Agreement: Before making any extra payments, check your loan agreement for any clauses related to extra payments or early payoffs. Some loans might have penalties that could negate the benefits of paying extra.
2. Contact Your Lender: Reach out to your lender to confirm their policy on extra payments. Clarify if there are any fees involved or if there’s a maximum allowable amount you can pay as an extra.
3. Calculate the Benefits: Use a loan calculator to estimate how much interest you will save and how much earlier you can pay off your loan by making extra payments.
4. Schedule Your Payments: Decide whether you will make regular extra payments or occasional lump sum payments. Set up automatic payments if possible to ensure consistency.
5. Monitor Your Loan Statement: After making extra payments, keep an eye on your loan statement to ensure that these payments are applied correctly to your principal balance.

Tips and Considerations

Here are some expert tips and considerations when making extra payments on your car loan:

• Check for Redraw Facilities: Some loans offer redraw facilities, allowing you to access extra payments if needed. This can provide financial flexibility if circumstances change.
• Budget Wisely: While it’s beneficial to make extra payments, ensure you’re not compromising your other financial obligations. Maintain a balanced budget.
• Consider Refinancing: If your current loan terms are restrictive, refinancing with a different lender might offer better terms, such as lower interest rates or more lenient extra payment policies.
• Assess Your Financial Goals: Align your extra payment strategy with your broader financial goals. Prioritise high-interest debts or savings if they offer more significant long-term benefits.

Frequently Asked Questions

1. Can I make extra payments on any car loan? Not all car loans allow for extra payments without penalties. It depends on the terms of your loan agreement.
2. How much can I save by making extra payments? The savings depend on your interest rate, loan balance, and the amount of extra payments you make. Use a loan calculator to determine potential savings.
3. Is there a limit to how much extra I can pay? Some lenders may impose a cap on extra payments, so it’s crucial to confirm with your lender.
4. What if my lender charges a penalty for extra payments? Consider negotiating with your lender or refinancing with a lender that offers more favourable terms through Esteb and Co’s panel of 83+ lenders.
5. Will extra payments affect my credit score? Making extra payments can positively impact your credit score by reducing your debt faster, which improves your credit utilisation ratio.
6. Should I make extra payments or save the money? This depends on your financial situation. If you have high-interest debts or insufficient emergency savings, it might be better to address those first.
7. How do I ensure my extra payment is applied correctly? Clearly indicate on your payment that it is an extra payment and follow up with your lender to confirm it is applied to the principal balance.