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Can I Pay Off My Car Loan Early?

2021 Genesis GV80 racing down highway

 

Paying off a car loan early can be a smart choice, but when is it a good idea to do so? If you’re in a good financial situation, you have money set aside for emergencies, and your money wouldn’t be put to better use elsewhere, you can save money on interest by learning how to pay off a car loan early with our team.

 

 

Is it Good to Pay Off a Car Loan Early?

For some, making regular, on-time monthly payments is a good goal all on its own. For others with a little bit more ambition, paying off a car loan early will seem like an even better idea. Here’s a closer look at the factors that you should consider in your decision:

Reasons to Pay Off a Car Loan Early

  1. Since your total interest costs are based on how long it takes you to pay off your loan, taking steps to complete repayment ahead of schedule can end up saving you plenty of money in the long run.
  2. If you would like to free up your monthly income for a larger goal, and paying off your car loan seems like the most feasible way to lower your regular costs, then by all means—there’s nothing wrong with paying off a car loan early.
  3. If you need to get approved for a new loan, paying off your car loan early could lower your debt-to-income ratio and make you a better prospect for Henderson and North Las Vegas lenders.

Reasons to Keep Making Payments on Schedule

  1. Some car loans have prepayment penalties built in. These are becoming less common, but you should always check with your lender before you make a plan to pay off your loan ahead of schedule.
  2. If you have other debts with higher interest rates, it would be smarter to put your extra money toward those loans.
  3. If you don’t have money set aside for emergencies, you should try to build up a nest egg before you try to pay off a car loan early.
  4. If you already have a good interest rate on your car loan, then you might not save very much by paying off your car loan early.

So, is it good to pay off a car loan early? It depends on your specific financial situation, but it is a good option for many drivers.

How to Pay Off a Car Loan Early

Those who want to pay off a car loan early have four tried-and-tested strategies to consider:

  1. Set money aside each month and make one large additional lump-sum payment at the end of the year.
  2. Round up your monthly payment by $50 or $100 each month.
  3. If your lender permits it, you can cut your payment in half and make bi-weekly payments instead of paying once per month. In this way, you’ll end up making 13 full payments in a year, rather than 12.
  4. Securing a lower interest rate can lower your base payment and make it easier to progress toward full repayment. Consider refinancing.

Some Paradise-area lenders give drivers the option to skip one or two payments per year, but if you’re interested in repaying a car loan early, you should always resist the temptation. Skipping payments will always add to your long-term costs.

Learn More with Genesis of Las Vegas!

Whether you’re interested in refinancing or you’d just like to talk with an expert about your options, our financing team is here to help! While you’re here, explore our other car-buying tips to save on your next lease or loan.

 

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