Many lenders offer borrowers the option to make bi-weekly 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 bi-weekly 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 bi-weekly 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.
The Bi-Weekly Auto Loan Calculator below will help borrowers determine if making bi-weekly auto loan payments is a good option for them.
Questions & Answers - Compliments of Consumer Financial Protection Bureau (Click for answers)
What should I know before I shop for an auto loan?
Do I have to get a loan from my dealer?
How do I compare auto loan offers? What should I look at besides the monthly payment?
What is included in my monthly auto loan payment?
What is the difference between paying interest and paying off my principal in an auto loan?
What is the difference between fixed- and variable-rate auto financing?
What is the difference between the interest rate and the Annual Percentage Rate (APR) in an auto loan?
Can I negotiate the interest rate on an auto loan?
Where can I get info on auto loan rates?
Can the dealer increase the interest rate after I drive the vehicle home?
What is the difference between deal-arranged and bank financing?
What is the Manufacturer's Suggested Retail Price (MSRP)?
What is amortization and how does it effect my auto loan?
What is a loan-to-value ratio in an auto loan?
What is the difference between a simple interest rate and pre-computed interest in an auto loan contact?
How does a down payment affect my auto loan?
How does a lender decide what interest rate to offer on an auto loan?
What effect will shopping for an auto loan have on my credit?
Will an auto loan help me rebuild my credit?
Why might I need a co-signer to get an auto loan?
What is credit insurance for an auto loan?
How do I qualify for an advertised 0% auto financing?
What is negative equity in an auto loan?
What is Guaranteed Auto Protection (GAP) insurance?
What is a "no credit check" or "buy here, pay here" auto loan?
What happens to my credit if I am late making payments on my auto loan, or if my car is repossessed?
How do I know who my auto loan lender or servicer is?
What happens if I still owe money on the vehicle I want to trade in?
How do I find what my trade-in vehicle is worth?
What is a retail installment sales agreement? Is this a loan?
What is the difference between a manufacturer's warranty and an extended vehicle warranty or service contract?