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Can I Pay Off My Car Loan Early?

If you’re a savvy shopper, paying off a car loan early likely appeals to you. But can you pay off a car loan early? Absolutely! Is it good to pay off a car loan early? In most cases, paying off a car loan early is a smart idea, but exceptions certainly do apply.

Even though you set a payment schedule when you bought your new or used car, you can make adjustments to that plan. Our team is here to help answer your questions before you take the leap of faith into altering your loan repayment plans. Learn how to pay off a car loan early and if it’s the right move for you with our expert financiers below!

Is it Good to Pay Off a Car Loan Early?

While certainly possible, is it good to pay off a car loan early? You’ll need a smart financial plan and a committed attitude to make sure paying off a car loan early works out. So, working with our experienced financial staff is a great way to get started. When you discuss paying off your debt, you can avoid the following:

  • Accruing extra interest paid
  • Becoming upside down on your loan
  • Higher debt-to-income ratio

When Does Paying Off a Car Loan Early Makes Sense?

If you don’t have enough cash to buy your vehicle outright from the start, you’ll need to set up a finance plan. This plan breaks down your payments into manageable chunks while you get the benefit of using your Walla Walla ride. Paying off your car loan early only makes sense if the following are true:

  • You hold little to no other debt, enabling you to have the cash flow to pay off your loan early.
  • You have savings you want to use to reduce your loan amount.
  • You want to reduce your expenses as you plan to grow your family or retire.
  • You’re hoping to improve your debt-to-income ratio.

Despite offering many benefits, you don’t want to upset your financial balance by paying off your car loan early. So, ensuring that your lifestyle won’t be negatively impacted or that your rainy-day-fund won’t be drained is crucial.

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

While the idea of paying off debt early may always sound like a good idea, in practice, this isn’t always the case. Here are a few scenarios where paying off your car loan early is not a great idea:

  • You have no savings for emergency situations.
  • You have a very fair interest rate.
  • You are using your payment history to build or improve your credit rating.
  • Some loan agreements actually have prepayment penalties. In this case, you would want to avoid adding fees to your bill.

How to Pay Off a Car Loan Early

After you review our recommendations, you can make a fully informed decision about paying off your loan early. If you’re committed, learn how to pay off a car loan early below:

  • Make Bi-Weekly Payments: Make sure to run this technique by your lender before employing it. Not all lenders allow bi-weekly payments. If they do, divide your full monthly amount into two, then make that payment every two weeks. This practice will lead to making thirteen full payments in a year, rather than twelve.
  • Round-Up Your Payment Each Month: Round up each payment to the nearest fifty dollars.
  • Make One Lump Sum Extra Payment: If you prefer to skip out on doing math or making extra payments on a routine basis, make one lump sum payment to get ahead.
  • Resist the Temptation of Skipping a Payment: While some lenders actually allow you to skip a payment or two without incurring a penalty, this will only lengthen your loan. This will lead to paying more in the end.
  • Refinance with a New Car Loan: If you have a strong payment history over a few years, you may be eligible for refinancing. This is only a good idea if you can secure a more favorable interest rate.

Learn More about Car Financing Near Tri-Cities!

With the right strategy, you can pay off your car loan early and save money in the long run. If you need guidance, we offer car buying tips to help you shop and save like a pro like how quickly you can trade-in your financed car. If you have any questions about your automotive needs, contact us today!

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