Can You Pay off Your Car Loan Early?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - August 7, 2018

If you have the ability to pay off your car loan early, you definitely can do it. But, if you aren’t careful, you could end up leaving yourself without enough money for other important things.

How to Pay off Your Car Loan Faster

There’s no doubt that paying off your car loan early can help you save on interest charges and improve your credit score. But, how do you successfully pay off your car loan faster? There are three things you can do to help you pay off your car loan quicker:

  • Consider bi-weekly payments – By making bi-weekly payments you can pay off your car loan earlier. Instead of paying 12 payments a year, you pay 13. This lowers the amount of interest charges that accumulate over time.
  • Consider rounding up – If you have extra funds to put toward your car loan, consider rounding up each month. If you pay $160 a month, you can add an extra $40 to make your monthly payment $200, which will help pay off the loan faster.
  • Add money when you can – Not everyone can add extra money every month, but if you’re able to add some here and there, it definitely can work in your favor. Any amount can help, even if it’s an extra $10.

Budgeting extra money to pay off your car loan early can take some planning. Make sure you do the calculations and double check the terms of your finance contract.

Are there Prepayment Penalties?

The good news is because most car loans use simple interest there aren’t any prepayment penalties involved. Prepayment penalties are listed on the loan agreement that state what the borrower is allowed to pay off and when. This is typically something you see on mortgages, not car loans.

The Bottom Line

There’s no harm in paying off your car loan early. Where you can go wrong is if you don’t properly budget for extra payments.

If you weighed your options and crunched the numbers and know you’re ready to take on an auto loan, but are struggling to find a dealer to work with, CarsDirect wants to help out. We’re connected to a nationwide network of dealerships that specialize in working with people in unique credit situations. We want to connect you to a dealer in your area, to get started simply complete our online car loan request form today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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