Can I Pay Off My Car Loan Early?
When you find you have room in the budget, you may find yourself wondering, “can I pay off my car loan early?” The simple answer is yes! While your new or used car had a set auto loan when originally financed, you can contact the team at Weir Canyon Acura to adjust your payments. Follow along with our guide, and explore if it is good to pay off a car loan early, and the different ways for how to pay off a car loan early.
Deciding if it is Good to Pay Off a Car Loan Early
The first steps for drivers considering paying off their car loan early would be to create a sound financial plan, and with the help of a financial advisor, drivers can find the best plan to tackle their debt. As a result, drivers have the chance to decrease these outcomes:
- The overall interest paid
- Becoming upside down on your loan
- Lower debt-to-income ratio
When to Consider Paying Off a Car Loan Early
It’s common that when shoppers are purchasing a car, they consider financing instead of paying the full amount upfront. However, that can change over time and it may be a good idea to consider paying off a car loan early. It may be a good idea to pay off a car loan early if these factors apply:
- There is little to no other debt
- There is savings that can be applied to the car loan
- Drives are interested in lowering lower out-going expenses to retire or grow their family.
- Drivers are looking to improve their debt-to-income ratio.
It’s important to remember that getting ahead on a car loan is meant to help drivers around Tustin. Be sure that paying off a car loan early won’t negatively impact everyday life and dip into the emergency funds.
When Paying Off a Car Loan Early Isn’t the Right Option
While it’s good for drivers to assess ways to get ahead on their loan, it might not always be the right decision. If these factors apply, it may not be the right time to pay off the car loan early:
- There is no emergency fund
- The loan doesn’t have a reasonable interest rate.
- Drivers are interested in building credit or improving their credit score
- The loan agreement has a prepayment penalty.
Tips for How to Pay Off a Car Loan Early
Once Montclair drivers have considered paying off a car loan is beneficial, there are several ways to go about it. These options for how to pay off a car loan early can be used individually or combined:
- Bi-Weekly Payments: By separating the full monthly payment into two, the payments will be made every two weeks for a total of thirteen full payments by the end of the year instead of the typical twelve. This method should be cleared with the lender as not all loans allow bi-weekly payments.
- Rounding-Up Monthly Payment: Easily round up the monthly payments to the nearest fifty dollars to get ahead on the loan.
- Make an Extra Lump Sum Payment: One large extra payment each year can help drivers get ahead on the loan and help achieve the same interest savings that can be found by rounding up payments.
- Resist Skipping Payments: While many lenders allow drivers to skip a payment or two when notified beforehand, missing a payment should be resisted unless it is an emergency situation. Missing a payment can not only extend the length of the loan term, it can also allow it to accrue additional interest.
- Consider Refinancing with a New Car Loan: Tustin drivers who have a good history of full and timely payments can be eligible for a refinanced car loan. It’s important to only consider refinancing if it comes with a lower interest rate. A lower interest rate can lead to a lower monthly payment, and that extra money saved can be used towards paying off the car loan early.
Discover Financing Options with Weir Canyon Acura!
If you’re interested in how to pay off your car loan early, talk to the experts in our finance center. Our team is ready to help you with any financing questions you have so you can get back to enjoying your ride. When you’re ready for your next new Acura, explore our other car buying tips.
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