Early Loan Payoff Calculator: Understanding Your Terms and Interest Rate to Pay Off Your Debt

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January 27, 2012

Calculating your auto loan payoff can be complicated, but fortunately loan payoff formulas are available to the potential buyer. Making use of a loan payoff calculator will allow you to understand the interest rate and total payments that will be required. Remember that the loan payoff amount on an automobile is not just the money that is still to be paid on the principal. Interest payments need to be factored in, as do any payment penalties that may crop up.

Request a Quote from the Finance Company

Always be aware of the amount you'll be required to pay back each month. If there's any doubt, check immediately with your dealership, lender or financial institution that provided the loan. Researching online will save you from having to physically visit the company, and with the account number you can easily determine the loan payment amount. It is possible to estimate your payoff by determining the total principal amount on the loan and by then factoring the interest in.

Be aware that if you are a bad credit buyer, you may have been requested to do repayments at each pay day. This could be bi-weekly or any other combination of days or weeks depending on your personal wage payment date.

Consider a Refinance Loan

A refinance loan will give you the opportunity to move from a fixed rate to payments with substantially less interest. Remember that it is mainly the interest that cripples an automobile buyer. A drop in the interest rate of as little as 1% could save you hundreds of dollars over the life of the loan.

Options You Can Afford

Although not every buyer can afford to pay additional amounts, particularly not buyers who have bad credit, be aware that options do exist to save money in the long run by making payments more often and by making payments larger than the minimum that is required. The great benefit is that the interest, which becomes so damaging to your checkbook, is brought down so much quicker.

Stretching out Payments

Buyers with good credit may be tempted to stretch out their payments over a longer period, so as to pay less each month (bad credit buyers will not be allowed this opportunity). This approach is effectively very poor in that it will take so much longer to eliminate the loan. In certain instances, you could easily land up owing more than what the vehicle is actually worth. Whenever possible, keep your auto loan to a period of five years or less.

Paying Off ahead of Time

Despite what has been discussed above regarding the considerable advantages to paying off youy auto loan in the quickest possible time, make sure that the lender has not included a prepayment penalty that will actually cause you to lose money by finalizing the loan early.

The best weapon when it comes to auto loan repayments is to fully understand the terms and interest that are relevant to your particular purchase.

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