Can I Pay Off My Car Loan Early?

Woman shaking mans hand over a car contract clipboard with car keys

 

Most %%target_city_1% drivers who purchase a vehicle from our used or new car energy have a car loan that results in a monthly payment. Depending on your payment plan, you must pay at least the agreed upon amount each month in order to pay off your car loan within the appropriate time frame. If you’re considering paying off your car loan early, you’re in the right place! Our finance team will give you the tools you need to accomplish your goals. Read more below!

 

Is it Good to Pay Off a Car Loan Early?

Some of our Hamilton, NJ customers are curious to know if it’s good to pay off a car loan early. The answer is slightly complicated: it depends. In general, there are plenty of benefits that come with paying off a car loan early. Let’s explore your options!

When Paying Off a Car Loan Early is Best

Below are some scenarios that would make it a good idea to put more money towards your auto loan to pay off your car early: 

  • You’ve created a financial plan, so you have extra money to put towards your car loan each month. 
  • You’ve minimized your additional debts. 
  • You’re looking to lower your monthly expenses long term. 
  • You’re looking to improve your debt-to-income ratio. 

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

  • You don’t have enough saved up to put extra money towards your car loan.
  • You’re looking to build your credit score by completing on time, monthly payments. 
  • You have an exceptionally good interest rate. 
  • Your loan agreement includes penalties for paying the loan off early. 

How to Pay Off a Car Loan Early

If paying off your loan early is the best choice for you and your Yardley, PA lifestyle, then we have some tips to help! Take a look at our options to decide which route is best for you: 

  • Make Bi-Weekly Payments – Check with your lender first to ensure it’s okay to use this technique; divide your monthly car payment by two, then make that payment amount every two weeks. Using this method, you will effectively be making 13 full payments per year rather than 12. 
  • Round Up Your Payment Each Month – Instead of paying the exact amount, round up the amount to the nearest $5 each month. 
  • Make One Extra Payment Each Year in One Lump Sum – If you receive a yearly bonus, contribute some of it each year to your loan. This is a great alternative if you don’t have the flexibility to pay twice a month or add to your monthly payment. 
  • Resist the Temptation of Skipping a Payment – You never want to miss a payment, no matter how tempting it may be. This can hurt your credit score, lengthen your loan term and increase the amount of interest you’ll owe. 
  • Refinance with a New Car Loan – Once you’ve made one or two years’ worth of on-time, in-full payments, you might be a good candidate for refinancing. Of course, you should only refinance if it’s securing you a lower interest rate. The lower interest rate will lower your monthly payment, making it easier to pay more than what’s required each month, so you can pay off your loan early.

Learn More about Payment Options with Haldeman Lexus of Princeton!

If you’re looking to get a new vehicle soon, apply for financing with Haldeman Lexus of Princeton! We’ll make sure you understand the loan agreement and hopefully help you reach your financial goals. You can use our payment calculator tool online to get an idea of how much your monthly payment will be before you purchase!

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