Can I Pay Off My Car Loan Early?

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If you take out a car loan when purchasing a vehicle, you will have a set monthly payment schedule you will need to stick to until the vehicle is paid off. However, you may be wondering if paying off a car loan early is possible. This option is possible, but there are a few things to consider before deciding to do so. 

The guide from our finance experts below will discuss the following topics: 

  • When paying off a car loan early is or isn’t a good idea
  • How to pay off a car loan early

If you decide that paying off a car loan early is beneficial, the guide also discusses tips for fitting larger payments into your current budget. 

Is it Good to Pay Off a Car Loan Early?

Is it good to pay off a car loan early? For many drivers in Sandy Springs and Kennesaw, it can be. While it may require more diligence when it comes to budgeting and spending, you will be rewarded with lower interest paid overall, decreased chances of becoming upside down on your loan, and a lower debt-to-income ratio.

Paying Off a Car Loan Early is Beneficial When: 

  • You have little or no other debts beyond your car payment 
  • You have money saved or wiggle room in your budget in case of emergency expenses
  • You want to lower your monthly expenses to plan for a larger financial goal
  • You are interested in improving your debt-to-income ratio

Paying Off a Car Loan Early is Not Beneficial When: 

  • You do not have a lot of money saved in case of emergency
  • You have an exceptionally good interest rate
  • You are looking to build your credit score by making on-time, set monthly payments 
  • Your loan agreement has penalties for paying the loan off early 

How to Pay Off a Car Loan Early

Wondering how to pay off a car loan early? You have a couple of options to consider. 

  • Make Bi-Weekly Payments – If this method is allowed by your lender, divide your monthly car payment by two, then make that payment amount every two weeks. You will end up making 13 full payments per year rather than 12. 
  • Round Up Your Payment Each Month – Each time your payment is due, round up the amount to the nearest $50.
  • Make One Extra Payment Each Year in One Lump Sum – Make one large extra payment per year. 
  • Refinance with a New Car Loan – If you’ve consistently been making payments on time for awhile now, you may want to consider refinancing if you can secure a lower interest rate. 

Contact the Finance Experts at Atlanta Autos

Is it good to pay off a car loan early? It can be a great idea for many Smyrna drivers. Contact Atlanta Autos if you have any questions.

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