Is It Good to Pay off a Car Loan Early?

Sometimes Madison customers ask us, “Is it good to pay off a car loan early?” Paying off a car loan early could be a wise thing to do, but it depends on your financial situation. Generally, there’s no penalty for paying off a car loan early, but you should double-check with your lender. Learn more about how to pay off a car loan early and if it’s the right choice for you with the finance team at Music City Autoplex.

What to Know About Paying off a Car Loan Early

There’s a few things you should consider about paying off a car loan early. We recommend that you meet with your financial advisor in Nashville to discuss these details: 

• Your total interest paid
• Whether you are upside down on your loan
• If it will improve your debt-to-income ratio

When to Pay off a Car Loan Early

Is it good to pay off a car loan early? It depends. Here’s how to know if you should consider paying off your car loan early: 

• You have very little debt
• You have plenty of savings to apply towards your car loan
• You need to lower your expenses to retire or meet another financial goal
• You intend to improve your overall debt-to-income ratio
• Paying off your car loan early won’t significantly disrupt your finances or use up all of your emergency funds. 

When Not to Pay Off a Car Loan Early

Sometimes, it might not be a good idea for Hendersonville drivers to pay off a car loan early. You might not want to pay it off early if the following are true: 

• Your current lender has prepayment penalty fees
• You don’t have many extra savings for emergencies 
• Your main goal of paying it off is to improve your credit

How to Pay off a Car Loan Early

If you want to know how to pay off a car loan early, try the following: 

• If it is okay with your lender, make bi-weekly payments. You’ll end up making thirteen payments every year instead of twelve. 
• Round up each of your monthly payments to the nearest fifty dollars or more. 
• Make one extra lump sum payment every year. Some Clarksville drivers like to use their tax refund for this purpose.
• Don’t skip payments, even if your lender says it’s okay. Skipping loan payments lengthens your loan, so you have to pay more interest. 

• Refinancing with a new car loan at a better interest rate can be a good option. If you have a good payment history, you may be eligible to refinance your car loan. 

You can use one or all of these strategies to pay off your car loan early. We invite you to chat with the finance team at Music City Autoplex if you have questions. To refinance, you can apply for financing online

Get the Auto Financing You Need at Music City Autoplex 

Now that you no longer have to wonder if it’s good to pay off a car loan early, if you have other auto loan questions, turn to the finance team at Music City Autoplex. Contact us to speak with a finance team member. We’re here for you!