Can I Pay Off My Car Loan Early?

a car owner learning if they can pay off a car loan early
 

If you find yourself in a good financial position and you’re wondering “Can I pay off my car loan early?” The answer is yes! There are a few steps you’ll need to take, but paying off your car loan early is easy with the team at Major World Chrysler Dodge Jeep Ram. Learn how to pay off a car loan early with Major World Chrysler Dodge Jeep Ram, then read our car buying tips to learn more about the differences between buying and leasing for your next vehicle.

 

 

When is it Good to Pay Off a Car Loan Early?

In order to pay off your car loan early, you’ll need a solid financial plan. To get this, it would be best to meet with a financial advisor in Westbury to discuss the best way to pay off your car loan debt. When you pay off your car loan early, you can expect the following:

  • Lower overall interest paid
  • Gaining positive equity on your loan
  • Lower debt-to-income ratio

When You Should Pay Off Your Car Loan Early 

Paying off your car loan early is a great way to save more money overall, but you need to make sure you’re not putting yourself in a bad financial position by doing so. Read our tips below to see if paying off your car loan early is a good idea: 

  • You have little to no other debt, which allows you to free up cash to pay off your loan.
  • You have savings you want to apply to your car loan.
  • You want to lower out-going expenses to retire or grow your family.
  • You’re looking to improve your debt-to-income ratio.

When You Shouldn’t Pay Off Your Car Loan Early 

While your intentions may be good, there are some situations where paying off your car loan early isn’t a good idea. If you’re experiencing any of the situations below, then you may want to put off paying off your car loan early:

  • You have no extra money for emergencies.
  • You already have a highly reasonable interest rate.
  • You are looking to build your credit or improve your credit score.
  • Some car loan agreements can have prepayment penalties. Therefore, paying off your car loan early may not be beneficial.

How to Pay Off a Car Loan Early

Now that you’ve determined that paying off your car loan early is a good idea, follow the steps below to see the different ways you can pay off your car loan ahead of schedule. Remember, it’s always a good idea to meet with a Manhattan financial advisor or contact our East Hill-area dealership to discuss your plans. 

  • Make Bi-Weekly Payments: Discuss this method with your lender first. Not all car loan lenders will allow bi-weekly payments, but if they do, you can divide your full monthly amount into two and make that your payment every two weeks. You will make thirteen car payments instead of twelve for the year.
  • Round-Up Your Payment Each Month: Round your monthly payments to the nearest fifty dollars each time you make payment.
  • Make One Lump Sum Extra Payment: To achieve the same interest savings as if you did round up your payment, pay a lump sum—a one-time extra payment that is a large amount towards your car loan every year.
  • Resist the Temptation of Skipping a Payment: Resist skipping a car loan payment if you can. Many lenders will allow you to skip a payment or two upon consent annually. The ability to skip a payment is meant for financial emergencies only. If you use the payment pass, you lengthen your loan term and acquire additional interest.
  • Refinance with a New Car Loan: If you make your monthly payments on time and have a good payment history after two years, you may be eligible to refinance your loan. Remember that you only want to refinance if you can get it at a lower interest rate than what you currently have. The decrease in an interest rate will lower your monthly payment. Use the additional money to pay off your loan early.

You may also be able to combine some of these options. Make sure to speak with our finance team to see what you can do to pay off your car loan early. 

Learn More About Car Financing with Major World Chrysler Dodge Jeep Ram 

Paying off your car loan is an easy way to save more money overall and put yourself in a great position with your credit. Learn more car buying tips from Major World Chrysler Dodge Jeep Ram like what is MSRP and the benefits of buying a pre-owned model. Visit our Long Island City showroom to browse our new vehicle inventory or discuss your financing options with our expert staff. We look forward to helping you reach your financial goals! 

 

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