Can I Pay Off My Car Loan Early?

Can I Pay Off My Car Loan Early?

Yes, you can! Whether you live in the American Fork area or in Hillsboro, paying off your car loan early can be done! While your new or used vehicle has a set amount when it comes to your auto loan finance plan, you can get in touch with us to adjust your payments. In this guide, we’re answering top questions like:

• Is it good to pay off a car loan early?
• How to pay off a car loan early?

Is it good to pay off a car loan early? How to pay off a car loan early?

Is it Good to Pay Off a Car Loan Early?

To pay off your vehicle early, a sound financial plan is needed. This is why it’s best to speak with a financial advisor about paying off your car loan early while keeping up with your other debt. When you do, a few outcomes will decrease:

• The overall interest paid
• Becoming upside down on your loan
• Lower debt-to-income ratio

Paying Off a Car Loan Early: When Is This a Good Option?

Paying off your car loan early makes sense if:

• You have little to no other debt, allowing you to free up cash to pay off your loan.
• You have good-sized savings that you want to apply to your car loan.
• You want to lower out-going expenses to retire or grow your family.
• Looking to improve your debt-to-income ratio.

Keep in mind that you do not want to put your finances in a bad way. This is why it’s good to ensure that paying off your car loan early won’t hurt your lifestyle or emergency funds.

When Paying Off a Car Loan Early Isn’t the Best Option.

We understand that many drivers would like to pay off their vehicle early if they’re able to, however, it’s not always the best option. Below is a look at when paying off a car loan early is not the right decision:

• You have no extra money for emergencies.
• You do not have a reasonable interest rate.
• You are looking to build your credit or improve your credit score.
• Some car loan agreements can have prepayment penalties.

How to Pay Off a Car Loan Early

After reviewing our recommendations, if you choose to pay off your car loan early, here is how you can do that:

• Make Bi-Weekly Payments: Make sure this is okay with your lender before doing this. If they allow it, divide your fully monthly amount into two, and make those payments every two weeks. This makes 13 car payments for the year instead of 12.

• Round-Up Your Payment Each Month: Round up your monthly auto loan payments to the nearest fifty dollars each time you make a payment.

• Make One Lump Sum Extra Payment: Get the same interest savings as if you did round up your payment by paying a lump sum — a one-time extra payment in a large amount towards your car loan every year.

• Do Not Skip a Payment: Many lenders will allow you to skip a payment or two annually, which should be used for financial emergencies only. Skipping a payment lengthens your loan term and acquires more interest.

• Refinance with a New Car Loan: If you make your monthly payments on time and have an excellent payment history after two years, you can see if you’re eligible to refinance your auto loan. This should only be done to get a lower interest rate than what you have. This lowers your monthly payments, and you can use the money you’re saving to make additional payments to pay off the loan early.

You may be able to combine a few of these options. Speak with one of our financial experts to see what option is best for you.

Get More Car Financing Tips near With Truck Ranch!

Logan drivers have the option of paying off their car loan early. Don’t hesitate to give us a call with any additional questions or to schedule an appointment. Our team is standing by to help in any way that we can to get you one step closer to financial freedom.