How to Pay Off Your Car Loan Early

How to Pay Off Your Car Loan Early

The car loan market has continued to grow over the years.With more and more people considering acquiring motor vehicles, this trend is bound to continue. It is also important to note that these car loans are paid for over a long period of time which lasts up to 60 or 70 months. Below are some tips on how best you can pay off your car loan early.

Pay half the monthly payment every two weeks – This may seem like a wash, but if your lender allows you to do it, you should. You will end up making 26 half-payments per year, or 13 full payments, rather than 12 monthly payments.

Determine the exact payoff amount of your car loan – Obtaining the exact amount of money owed on your car loan will allow you to make financial plans regarding paying off the loan. If you do online banking, this information can be found under your account, or review your monthly statement that is mailed.

Obtain a copy of your bank or loan agreement – Speak directly with a loan adviser or review the terms and conditions of your loan to determine if penalties apply for paying the car loan off quickly. Some banks or financial institutions may charge you fees or penalties for paying off the car loan sooner than the original life of the loan, especially if you cause them to lose money in interest.

Consult your financial institution for loan payoff recommendations – Ask your lender if they can decrease the balance of your car loan if you can pay the remaining balance in one lump sum. In some cases, lenders may lower the remaining balance of your car loan substantially if you can pay off the remaining balance with just one payment.

Apply extra earnings or cash gifts to your car loan – Extra income such as tax refunds, bonuses from your job, or cash gifts from birthdays or holidays could be applied to your car loan, resulting in a faster payoff. You will be paying more in interest on your car loan than you would earn in a savings or money market account.

Don’t take out a car loan with prepayment penalties – There are many choices of where to take out a car loan, so next time make sure you choose a financial institution that does not require prepayment penalties.

Categories: Vehicle finance