Can I Pay Off My Car Loan Early?

Is it good to pay off a car loan early? Paying off a car loan early is generally a good thing, but there are some situations when it’s not recommended. We’ll go over these situations and more below, as well as how to pay off a car loan early for your new or used Washington vehicle. Are you looking to trade in your current vehicle? Stephen Wade Cadillac accepts all kinds of trade-ins at our St. George dealership!

Is it Good to Pay Off a Car Loan Early?

Paying off a car loan early rewards drivers with less interest paid over time, as well as a vehicle to call your own more quickly.

When Paying Off a Car Loan Early Benefits You

• You’re in a position to pay off your car loan early because you have little to no other loans.
• You have the funds to pay off your car early either with a final larger payment or larger monthly payments to staff off interest.
• You’re trying to lower your monthly payments for an even larger financial goal, and you now have the means to do so.
• You want to improve your debt-to-income ratio.

When Paying Off a Car Loan Early Doesn’t Benefit You

• You don’t have many extra funds for emergencies.
• You have a great interest rate that’s adding an incredibly minimal amount of interest paid per month (even less so if you’re already paying more than what’s required per month).
• You’re looking to improve your credit score with on-time, paid monthly payments.
• Most importantly, some car loan agreements have prepayment penalties. You want to avoid paying those penalties by sticking to your specific agreements. If you aren’t sure if your loan has this kind of agreement or not, check with your loan provider.

How to Pay Off a Car Loan Early

• Make Bi-Weekly Payments – These will staff off the interest gained on your loan so that you’re paying more in principal over time to reduce your loan and the time paid on that loan. You can divide your monthly payment by two and pay twice a month to lower the amount of interest paid.
• Add More Per Month – Even adding $25 to $50 per month will help lower your principal over time, saving you some payments while saving money.
• Make One Extra Payment Each Year in One Lump Sum – Choosing one extra lump sum per year instead of adding more per month is another way to lower costs.
• Never Skip a Payment – If you pay far ahead enough, we recommend always sticking to a monthly payment and letting it autopay at least once a month. You’re only going to get more and more ahead on your auto loan and save yourself even more time and money.
• 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 for a lower interest rate. A lower interest rate will lower your monthly payment.

Learn More About Paying Off a Car Loan Early with Us

Is it good to pay off a car loan early? It is for most drivers out there, and our financing center can help you with everything when it comes to car loans. If you still have questions about car loans, contact us today to learn more. We also offer plenty of new vehicle specials if you’re looking to upgrade to a new Cadillac car!