Can I Pay Off My Car Loan Early?
Lakewood drivers who finance their new or pre-owned Genesis with an auto loan will have a fixed monthly payment amount they have to pay in order to pay it off in time. Although, what if you’d like to put a bit more money towards your monthly payment amount? Can you pay off your car loan early? Yes, paying off a car loan early is an option for many Westminster vehicles owners.
Read this guide by the financiers at Genesis of Golden as we guide you through how to pay off a car loan early, as well as how to determine when an early auto loan payoff is a good idea.
Is it Good to Pay Off a Car Loan Early?
Paying off a car loan early entails solid financial planning and diligence. However, an early loan payoff can result in lower interest paid overall, decreased chances of becoming upside down on your loan, a lower debt-to-income ratio, and you’ll be even closer to financial freedom.
When Paying Off a Car Loan Early is a Good Idea
- You don’t have many other debts to worry about and would like to pay off your car loan to free up money for other expenses.
- You have extra money set aside to make larger monthly payments and making these larger payments won’t negatively affect your financial circumstances.
- You’re trying to lower your monthly payments to allocate more funds towards a larger financial goal.
- You’re looking to improve your debt-to-income ratio
When Paying Off a Car Loan Early Isn’t the Best Option
- You don’t have a lot of money set aside for emergencies
- If you have a good interest rate, it may be best to continue making on-time payments. The money you’d use to pay off your auto loan early could be applied elsewhere like a retirement fund or mortgage.
- You’re using your on-time, set monthly payments to build your credit history or raise your credit score
- Some auto loan agreements have prepayment penalties. If this is the case, you’ll want to avoid those penalties by continuing to pay your regularly scheduled payment amount.
How to Pay Off a Car Loan Early
There are a few ways that Arvada drivers can pay off their car loan early. Read the option below to determining which route is best for you:
- Make Bi-Weekly Payments – Consult with your lender to make sure this is permissible, but you can divide your monthly car payment into two, then make that payment every two weeks. Using this method, you’ll be making 13 full payments per year rather than 12.
- Round-Up Your Monthly Payment – Each time you make a monthly payment, round up the amount to the nearest $50.
- Make One, Large Extra Payment Each Year – You can choose to make one large extra payment per year to achieve some savings on interest.
- Try Not to Skip a Payment– While some lenders will allow you to skip one or two car loan payments a year, you’ll want to try your best to avoid this. It will only lengthen your loan term and add more interest.
- Refinance with a New Car Loan – If you’ve made one or two years’ worth of on-time, in-full payments, you may be a great candidate for refinancing. Of course, you should only refinance if it will secure you a lower interest rate. A lower interest rate will lower your monthly payment, making it easier to pay more than what’s required each month so you can pay off your loan early.
Get More Financial Guidance From Genesis of Golden!
Ultimately, is it good to pay off a car loan early? For many Golden drivers, the answer is absolutely! Contact Genesis of Golden if you’d like more information on how paying off your car loan earlier than planned can save you money. We’re always here to provide our customers with expert car buying tips that they can trust!