Can I Pay Off My Car Loan Early?

Generally, St Louis and Jefferson County drivers stick to a consistent monthly schedule to pay off car loans on time. But, what if you want to change the due date? Can you pay off your car loan early? The answer is yes, most drivers are able to pay off a car loan earlier if they want. However, there are some things to keep in mind if you want to make that financial decision. Learn how to pay off a car loan early the right way with Suntrup Kia South, and get more car financing tips with our experts!

Is It Good to Pay Off a Car Loan Early?

Is it good to pay off a car loan early, or is it better to stick with your schedule? That depends on you and your financial situation. You’ll need to do a lot of research and planning to pay off a car loan in advance, but you’ll be rewarded with some notable benefits as well. Here are some of the pros and cons to weigh before making your decision:

When Paying Off a Car Loan Early Makes Sense

• If you have little to no other debts, then paying off a car loan early can free up extra money every month.
• If you have sufficient funds saved up, you’ll have extra peace of mind and financial wiggle room when paying off your loan.
• If you want to lower your monthly bills, accelerating your repayment will help you shift to other goals – like retirement and family planning.
• If you want to improve your financial profile, paying your loan early will improve your debt-to-income ratio.

When Paying Off a Car Loan Early Isn’t the Best Option

• If you don’t have sufficient funding saved up, paying your loan faster can put undue stress on you and your bank account. 
• If your interest rate is exceptionally good, it might be better to continue as planned. Take the extra money you would have used toward the car loan and place it in a retirement fund or savings account.
• If you’re using your car loan payments to build your credit history, you’ll benefit from staying on track rather than speeding up the process.
• If your car loan contract has prepayment penalties, be sure to read the fine print. It might not be worthwhile after you crunch the numbers. 

How to Pay Off a Car Loan Early

Let’s say you’re interested in paying off a car loan early. What’s the best method to chip away at the total? There are several methods, so see what makes sense for you:

• Make Bi-Weekly Payments – If your lender allows it, see if you can make bi-weekly payments. Split your monthly payments in two, and then make that payment every two weeks. This will bring you to 13 full payments per year rather than 12.
• Round Up Your Payment Each Month – Each time you make a monthly payment, round up the amount to the nearest $50 or so.
• Make One Extra Payment Each Year in One Lump Sum – You can also choose to make an extra payment in a lump sum at the end of the year, which will give you the same interest savings as rounding up payments. 
• Resist the Temptation of Skipping a Payment – Your lender might give you the leeway to skip one or two payments every year, but if you don’t need to do this, resist! It will lead to a longer loan term and bigger interest payments overall.
• Refinance with a New Car Loan – Have you been paying off your loan for a year or two? If you’ve made prompt payments over the years, consider refinancing. If you get a lower interest rate, it’s easier to speed up your repayment.

Get Expert Financial Advice With Suntrup Kia South!

So, is it good to pay off a car loan early? The answer may be yes, so feel free to contact us at Suntrup Kia South with any questions. We’d be happy to chat in person in St. Louis, so you can learn the best financial options for you.