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Should You Pay Off a Car Loan Early?

Car Loan

If monthly payments are wearing you down, you might be wondering if paying off a car loan early makes sense for you. Is it good to pay off a car loan early? Our finance department has helped a lot of Salt Lake City customers make this decision, and we can help you too. Read this guide to learn how to decide whether or not paying off a car loan early is a good idea. Then, if you have any questions, feel free to give us a call at 385-364-3762.

Is it Good to Pay Off a Car Loan Early?

The thought of being in debt for the entire length of your car loan may not sound appealing to you. Is it good to pay off a car loan early? The answer to that depends on your circumstances. Some of our West Valley City customers have found it very beneficial to pay off their loans sooner than planned, while others felt it made more sense for their circumstances if they rode out the term of their loan. Read the following to determine if this move is right for you:

Paying off a car loan early might be right for you if…

  • You would like to free up money for other expenses.
  • Making larger monthly car payments won’t affect your emergency funds and other finances.
  • You would like to lower your monthly expenses to plan for a larger financial goal, such as entering retirement or growing your family.
  • You need to improve your debt-to-income ratio.

Paying off a car loan early may NOT be a good idea if…

  • You can’t afford to make extra or higher car payments. Use our payment tool to see what you would pay.
  • You have a low interest rate and the money you’d use to pay off your loan early could be better used to create a retirement fund or for a future financial goal.
  • You need to build your credit history.
  • Your loan agreement includes a large prepayment penalty.

How to Pay Off a Car Loan Early

So, you’ve weighed the pros and cons, and decided paying off a car loan early is right for you. Then we recommend you try one or more of the following methods:

How to pay off a car loan early

  • Make one extra payment per year.
  • Make Bi-Weekly, instead of monthly payments – results in one extra payment a year.
  • Round up your monthly payment to the nearest $50.
  • Do not skip a payment.
  • Refinance your car loan if you can get a better rate. With a lower rate, you can afford to make higher or extra payments.

Talk to Prestman Auto of Salt Lake City About Your Options

Our knowledgeable finance managers have helped numerous customers make sense of their auto loans so that they could make informed decisions. They’ll be happy to walk you through your options when it comes to paying off your loan. And, if you’d like to learn more, check out our other car buying tips.

 

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