Paying Your Auto Loan Off Early

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - January 29, 2020

There are several ways you can save money on an auto loan as a bad credit borrower, and one of them is to pay off your loan early. Here's how…

Auto Loans Expenses

When you take out a car loan with bad credit, there are some things you can't escape, like having to make a down payment and a higher than average interest rate. However, these things aren't a burden you have to let cost you. In fact, a down payment is actually a simple way to save money right up front.

When you make a down payment, you're lowering the amount of money you have to borrow. Borrowing less saves money, because the more you borrow, the more you pay in interest charges over the course of your loan. Interest is the cost of borrowing money, and interest rates are mainly based on credit scores. This means that the lower your credit score is, the higher the interest rate you're likely to see.

Interest charges accrue daily based on the amount of money you owe on your loan. So, every time you lower your loan balance, you also reduce the interest charges. There are a few different options for reducing interest charges by paying your auto loan early; you just have to choose the one that works for you.

Early Payoff Options

Paying a car loan off early doesn't require any type of set schedule. The more you want to save, the more you should pay early. There are a few methods you can use in order to make payments early:

  • Pay what you can, when you can: This is the simplest method of early loan payoff. Whenever you have a little extra money, you can put it toward your auto loan. This can mean paying extra on each scheduled due date, or making an extra $50 payment a few times a month.
  • Round your payments up: You can choose how far up you want to round your payments, but the more you do, the better off you're going to be. If your payment is $363.56 and you only round up to $364 or $370, you're obviously making less of an impact than if you're to round up to $400 for each payment.
  • Split your payment: When you split your payment, you reduce the interest charges that accumulate between the two half-payments. To do this, pay half your payment a few weeks in advance and pay the remaining half on or near the due date.
  • Make a half-payment every two weeks: Bi-weekly payments are similar to payment splitting, except you make a half-payment every two weeks. If you stick to this schedule, you're able to make 13 full payments, rather than 12, each year.

Finding a More Affordable Vehicle

If paying off your car loan early isn't saving you enough money, it may be time to find a more affordable vehicle. An affordable car doesn't mean getting an old, beat-up used vehicle, it just means finding the right car that works for you – and one that retains its value over time. In some cases, you may even be able to finance a new vehicle despite having bad credit, as long as you're working with the right lender.

To find a lender that can help people get the financing they need without the hassle of driving all over town, let CarsDirect help. We work with a nationwide network of special finance dealerships that work with the right lenders, and finding one in your area is easy. Just fill out our simple, zero-obligation auto loan request form, and we'll get to work matching you with a dealer right away.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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