Paying your car loan weekly or bi-weekly (fortnightly) is generally better than monthly if your goal is to pay off the loan faster and save on interest. By making smaller, more frequent payments, you reduce the principal balance quicker, which decreases the interest accrued daily. Bi-weekly payments equal 13 full payments per year, reducing loan time.
Paying weekly is better. The interested is calculated daily, and it's calculated based on the outstanding principal. If you pay weekly, you will haves less outstanding principal on any given day than if you pay monthly, so daily interest calculation will be less.
Dave Ramsey's core car rules emphasize paying cash, avoiding new cars (unless you're a millionaire), keeping your total vehicle value under half your annual income, and using a strict budget, often suggesting the 20/4/10 rule (20% down, 4-year loan, 10% total car expenses) as a guideline if financing, but preferring no debt at all to avoid depreciating assets trapping you. He stresses buying reliable, used vehicles to prevent debt and build wealth.
The 50/30/20 rule is a simple budget guideline: 50% of your after-tax income for needs (like housing, groceries, and car payments/expenses), 30% for wants (dining out, entertainment), and 20% for savings and debt repayment. For a car payment, this means your total monthly car expenses (loan, insurance, gas, maintenance) should ideally fit within the 50% "Needs" category, with some experts suggesting car costs shouldn't exceed 10-15% of your income overall, making a modest car a "need" and luxury vehicles a "want".
Depreciation. Cars reportedly lose 20% of their value in the first year of ownership and retain just 40% of their original value after five years. Clearly, that is not a good investment. “Your goal should be to buy the least expensive car. Period,” said Orman. “That should steer you to a used car rather than a new car. ...
You'll save money.
Unless your loan has precomputed interest (more on that below), extra principal payments can help reduce the total amount of interest you'll pay.
The Rule of 72 is a quick formula that estimates how long it takes for money to double, whether it's an investment or a debt. The calculation is simple: 72 ÷ annual interest rate (%) = number of years for money to double.
For years, dealerships have been using a tactic called a “four square”—a sheet of paper divided into four boxes where the salesperson will write down your trade value, the purchase price of the vehicle you're buying, your down payment, and your monthly payment.
"I'm Going to Pay Cash!"
If they know you have a specific budget, they also know they won't be able to move you up to a more expensive, profitable model. So if the salesperson asks about financing, just say you're undecided.
A $30,000 car payment varies, but expect roughly $450 to $600 per month for a 5-year loan, depending heavily on your interest rate (e.g., 5% vs. 8%), down payment, and loan term; a shorter term or higher rate means higher monthly costs, while a longer term or better rate lowers them. For instance, at 7% over 60 months, it's around $590-$600, but with a 5.74% rate for 60 months, it's closer to $576, or around $490 for 48 months.
Although it may not seem like much, paying twice a month rather than just once will get you to the finish line faster. It will also help save on auto loan interest.
Each pay schedule comes with trade-offs: Weekly pay offers employee satisfaction but costs more to process, while monthly pay is cost-effective but risks reducing workforce morale.
Increasing Your Payment Frequency
You can save interest by increasing your mortgage payment frequency. When you select an accelerated weekly or bi-weekly payment option, you are essentially making the equivalent of one additional monthly payment each year which will help pay off your mortgage faster.
A principal-only car payment is an extra payment that is applied to your auto loan balance when there is no interest due. Lenders may not automatically apply extra payments to the principal, so you might need to make a specific request.
Lowering your credit score
Paying off your auto loan early eliminates the auto loan from your mix of credit accounts, which can cause a slight decrease in your credit score. However, any dip in your credit score should be temporary, as long as you don't have other negative factors affecting it.
In the short term, paying off your car loan early will impact your credit scores — usually dropping them by a few points. The short-term effects only last so long, and over the long term, your credit scores may rise because you've reduced the amount of debt you owe.
The 20/3/8 rule is a car-buying guideline suggesting you put 20% down, finance for 3 years or less, and keep your total monthly car expenses to 8% or less of your gross income, helping to ensure you buy reliable transportation without overspending and can still invest in other goals like retirement. It's a tool to avoid being "underwater" on your loan (owing more than the car's worth) and to prioritize financial health over luxury vehicles.
He has blamed politics for what he considers Americans' economic dependence, and has said presidents should do "as little as possible" about the economy. Ramsey supported Donald Trump in the 2024 United States presidential election.
The best way to finance a car involves getting preapproved from a bank or credit union before visiting the dealership to compare rates, making a significant down payment (15-20% is ideal), keeping loan terms shorter (around 48-60 months), and negotiating the total car price separately from the financing, allowing you to get a lower interest rate and save money long-term. Leasing or other options like PCP/HP exist, but a direct loan with good credit offers the most equity.