Can I Pay Off My Car Loan Early?

When you choose to finance your Sharon-commuter vehicle, you have an auto loan that will require a set amount of money to be paid every month. When you’re making these monthly payments on your new or used car, you’re working towards eventually paying off the auto loan. However, what if you’d like to pay more than your expected monthly amount? Is paying off a car loan early possible? Yes, paying off your car loan early is a viable option for many Hermitage drivers. Read this guide by the finance experts at Shenango Honda on how to pay off your car loan early, as well as how to determine if paying off your car loan is a good or bad idea. 

Is it Good to Pay Off a Car Loan Early?

Car owners often ask, “is it good to pay off a car loan early?” While this route takes solid financial planning and a lot of diligence, paying off your car loan early affords certain benefits such as lower interest paid overall, a lower debt-to-income ratio, decreased chance of becoming upside down on your loan, and you’ll be one step closer to financial freedom. 

When Paying Off a Car Loan Early is a Good Idea

• You’d like to free up money for other expenses.
• You have enough extra money in your budget to allocate towards making larger car payments
• You’re attempting to lower your monthly expenses to put money towards a larger financial goal like growing your family
• You want to improve your debt-to-income ratio

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

• You don’t have an emergency fund 
• You have a great interest rate 
• You’re making on-time payments to build your credit history and raise your credit score
• You car loan agreement has a prepayment penalty

How to Pay Off a Car Loan Early

After determining whether or not paying off your car loan early is a good decision, here are a few ways you can accomplish making it happen: 

• Make Bi-Weekly Payments – Be sure to check with your lender if this is a viable option. Divide your monthly car payment by two, then make that payment every two weeks. This way, you’ll be making 13 full payments per year rather than 12.
• Round Up Your Payment Amount– Each time you make a monthly payment, round up the amount to the nearest $50.
• Make One Large, Extra Payment Each Year –  Make one large extra payment per year to achieve the same interest savings as you would when making bi-weekly payments.
• Try Not to Skip a Payment– While some lenders may allow you to skip one or two payments a year, this will only extend your loan term and accrue interest. 
• 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. You should only refinance if you’re desiring a lower interest rate, which in turn will lower your monthly payment.

Get More Finance Advice From Shenango Honda!

So, is it good to pay off a car loan early? For many drivers in Hubbard, the answer is yes! Contact us if you have any additional questions about how to pay off your car loan early. We’re always happy to provide our Grove City-area customers with helpful car buying tips they can trust! 

Is it good to pay off a car loan early? For many Grove City drivers, the answer is yes! If you’d like more information on how paying off your car loan earlier than planned can save you money, contact us at Shenango Honda. We’re always happy to provide car buying tips you can trust!