Can I Pay Off My Car Loan Early?

It’s common for Long Island shoppers who opt for a new or used vehicle to take out an auto loan with set monthly payment amounts that they’ll be expected to pay off in time. However, there are some drivers who would prefer to exceed their monthly payment amounts to get rid of their debt faster. Those drivers might be wondering, “Can I pay off my car loan early? How can I pay off my car loan early?” The short answer is, yes, you can pay off your vehicle loan early and should aim to do so if you can! We’ll leave the long answer to the financial experts at Security Dodge Chrysler Jeep Ram below: 

Should I Pay Off A Car Loan Early?

Paying off a car loan early requires discipline and solid financial planning, but you’ll be rewarded with decreased chances of becoming upside-down on your car loan, lower overall interest paid, a reduced debt-to-income ratio, and you’ll be a step closer to financial freedom! 

When You Should Pay Off a Vehicle Loan Early

• You’re hoping to improve your debt-to-income ratio
• You’re trying to lower your monthly vehicle expenses to prepare for a larger financial goal, such as growing your family or retiring
• You have enough funds in your budget so that making larger monthly vehicle payments won’t affect your emergency funds/college savings/etc.
• You have little or no additional debts and would like to get your vehicle loan paid off so you can put your savings toward other expenses

When You Shouldn’t Pay Off a Vehicle Loan Early

• Some vehicle loan agreements feature penalties for prepayment. If this is the case, you want to avoid those loan prepayment penalties by adhering to your routinely scheduled loan payments
• You’re using your timely monthly payments to improve your credit score or build up your credit history
• You have exceptional interest rates, which makes it a smarter move to continue making on-time payments as currently agreed upon. The funds you would’ve used to pay off your vehicle loan early could be better put towards a financial goal or retirement fund
• You don’t have much money in your emergency funds to set aside towards prepayments

How Can I Pay Off My Car Loan Early?

There are several ways you can pay off your vehicle loan early. Check out the following options:

• Refinance with a New Vehicle Loan: Once you’ve made one or two on-time, in-full yearly payments, you may be eligible for refinancing. However, you’ll only want to refinance when it gains you a reduced interest rate. 
• Avoid Skipping a Payment: Some lenders allow you to skip one or two vehicle loan payments yearly. This could be tempting if you’re in the middle of a rough financial period, but it will only tack on more loan interest and lengthen your loan term. 
• Round-Up Monthly Payments: For each monthly payment, round up each payment amount to the nearest $50. 
• Make One Extra Yearly Payment in One Lump Sum: Prefer not to round up each monthly payment using the method mentioned above? You can choose instead to make one extra-large payment yearly to get the same interest savings. 
• Bi-Weekly Payments: Check with your loan lender to make sure this technique is approved; divide your monthly payment in half, then make that payment biweekly. This should allow you to make 13 yearly payments rather than 12. 

Explore Financing Options at Security Dodge Chrysler Jeep Ram!

So, can you pay off car loans early? Yes, if it’s financially responsible for you to do so! Feel free to contact the team at Security Dodge Chrysler Jeep Ram to learn more about your financing and payment options today!