Can I Pay Off My Car Loan Early?

Car Loan

 

Like many drivers around Simi Valley, you have likely financed your new or used car with a certain amount due each month, and it must be paid in the agreed amount of time. However, some vehicle owners want to get ahead on their payments, and pay more than what’s due each month. So, you may be asking yourself, is it good to pay off a car loan early? Yes, you can. Paying off a car loan early is a great option for many in the Thousand Oaks area!

Join the experienced finance team at Dependable Chrysler Dodge Jeep Ram to learn more about these important topics:

  • Is it good to pay off a car loan early? 
  • How to pay off a car loan early

If paying off a car loan early is one of your goals, check out our helpful guide below to help you through the process! If you have any questions, feel free to contact us anytime!

Is it Good to Pay Off a Car Loan Early?

Paying off car loans early is a goal of many, however, it may take significant financial planning and preparation for this to become a reality. However, you’ll be able to take advantage of paying lower interest rates, and lowering your chances of becoming upside down on your loan. You will also be rewarded with a lower debt-to-income ratio, and achieve your goal of being free from debt.

When Should You Pay Off a Car Loan Early?

  • If you are not in large amounts of debt and want to make more money available for other things, such as a mortgage or another investment.
  • You have a significant amount of money in savings, allowing you to make larger car payments each month without having to sacrifice funds for emergencies.
  • You want to lower your expenses each month for other financial reasons, such as growing your family or planning for retirement.
  • You want to have a lower debt-to-income ratio.

When You Shouldn’t Pay Off Your Car Loan Early

  • You’re tight on extra funds and don’t have much available for emergencies.
  • If you have a low interest rate, it may be best to keep making your payments on time, and continue paying the amount you agreed to when financing the car. You could allocate the money in other places, such as a mortgage or retirement fund.
  • You want to use your on-time monthly payments to increase your credit score or build a substantial credit history. 
  • Depending on the fine print on your loan, you may be subject to prepayment penalties. In this situation, it would be best to continue paying off the loan on the same monthly schedule, and paying the same amount each month.

How to Pay Off a Car Loan Early

So, you may be asking, how to pay off a car loan early? There are a few ways to do this, and you should choose the method that works best for you:

  • Make Bi-Weekly Payments – It’s important to get in touch with your lender to make sure you can make two payments each month. This involves dividing your monthly payment by two and paying that amount every two weeks. This allows you to make 13 full payments each year instead of 12. 
  • Round Up Your Payment Each Month – Every month you can round up your payment to the nearest $50. 
  • Make One Extra Payment Each Year in One Lump Sum – In the case that you don’t want to round out the payment each month, you could make one large extra payment each year to retain your interest savings.
  • Resist the Temptation of Skipping a Payment – It may be hard to believe, but some lenders will actually let you skip one or two payments each year. However, this is not recommended, as it could cost you more later in interest.
  • Refinance with a New Car Loan – Now that you’ve made a couple of years of on-time payments, you may be able to refinance your loan. However, it is important to note that you should only finance if you will receive a lower interest rate. The lower interest rate will allow you to make lower monthly payments, and make it much more attainable to pay more each month, helping you achieve your goal of paying off the loan early.

Learn More About Paying Off a Car Loan Early with Dependable Chrysler Dodge Jeep Ram!

So, now that you know how to pay off a car loan early in San Fernando Valley, come visit us at Dependable Chrysler Dodge Jeep Ram and meet with our finance center! We can help you decide if paying off a car loan early is a good idea, and walk you through the process of refinancing! For even more information, check out our car buying tips and tricks!

More from Dependable Chrysler Dodge Jeep Ram

  • How Much Can a 2022 RAM 1500 Tow?

    Simi Valley workers have relied on the 2022 RAM 1500 for all of their needs on the jobsite for years. The latest generation of all-new RAM 1500 trucks is just as reliable as those passed, and you’ll know you can tackle any tough task and enjoy the latest technology to keep you comfortable on your way…

  • Is the Grand Wagoneer Price Worth It?

      The luxury Wagoneer models are designed for sophisticated Simi Valley drivers with refined tastes, and are priced accordingly. Are the Wagoneers worth the price, though? Are Grand Wagoneers reliable? We go into detail below why we think these remarkable automobiles are well worth the price. We also break out the 2022 Grand Wagoneer price by trim, and…

  • The Impressive 2022 Wagoneer Interior

      The 2022 Wagoneer is one sleek SUV that would make a beautiful addition to any Simi Valley driveway. But just wait until you see the beautiful 2022 Wagoneer interior. Not only does this car look great on the inside, but there’s plenty of room, and you can fit the whole family and the dog, thanks…

x
Dependable Chrysler Dodge Jeep Ram 34.219479, -118.598495.