Final answer:
To lower the finance charge on a loan, you should aim to pay back the loan more quickly, reducing the total interest accrued over the loan's term.
Step-by-step explanation:
If you want to lower the finance charge, you should pay back the loan more quickly. The finance charge on a loan is essentially the cost of borrowing money, which mainly consists of interest and other fees. By paying off the loan faster, you reduce the amount of time that interest can accrue on the outstanding balance, which in turn reduces the total amount of interest you will pay over the life of the loan. For example, if the interest is calculated on a monthly basis, each payment you make reduces the principal balance, which results in lower interest calculations for the subsequent months. This is why, in a situation where a borrower could be potentially late on payments, they should still strive to pay off the loan as quickly as possible to avoid additional finance charges.
However, if the interest rates in the economy have fallen since you took out your loan, your current loan might have a higher rate in comparison to new loans. If this is the case, it could be financially advantageous to refinance your loan to the new lower rates, if possible. But this is a different consideration than the payment strategy to lower finance charges on the existing loan terms.