Is Paying Off a Car Loan Early Possible?

Yes, paying off a car loan early is possible! When you finance a vehicle, you will have a set monthly payment amount so that the loan can be paid off on time. If you’d like to pay more than your set monthly payment to pay the loan off sooner, you likely have that option. Paying off a car loan early is a viable option for many drivers in the Biloxi and Gulfport areas.

Is it Good to Pay Off a Car Loan Early?

While you will have to be diligent if you plan on paying off your car loan early, you’ll be rewarded with lower interest paid overall and a lower debt-to-income ratio. You will also be less likely to become upside down on your loan. What’s more? You will also be one step closer to financial freedom.

When Paying Off a Car Loan Early is Beneficial:

• You currently have little or no other debts.
• You have enough extra funds saved up or enough wiggle room in your budget. Making larger payments will not prevent you from having an emergency fund.
• You want to minimize monthly expenses to plan for a larger financial goal.
• You would like a better debt-to-income ratio.

When Paying Off a Car Loan Early is Not a Good Idea:

• You don’t have an emergency fund in place.
• You have an exceptionally good interest rate on your current loan.
• You want to build up your credit score by making consistent payments on time.
• Some car loan agreements include penalties for paying the loan off early.

How to Pay Off a Car Loan Early

Wondering how to pay off a car loan early? Here are a couple of helpful suggestions. You can decide which is best for your financial situation.

• Make Bi-Weekly Payments – If allowed by your lender, divide your monthly car payment by two. You will make a payment of this amount every two weeks. Essentially, you will make 13 full payments per year instead of 12.

• Round Up Your Payment Each Month – For each monthly payment, round up the amount to the nearest $50.

• Make One Extra Payment Each Year in One Lump Sum – Make one large extra payment each year.

• Refinance with a New Car Loan – After making payments in-full and on-time for at least one to two years, look into refinancing your loan if you can secure a lower interest rate.

Learn More with Mandal Buick GMC!

If you still have questions about paying off a car loan early, do not hesitate to contact the team at Mandal Buick GMC. We would be more than happy to help with all of your automotive finance needs.