Can I Pay Off My Car Loan Early?

Are you financing a car and wondering how to pay off a car loan early? Drivers in Chapel Hill need to look no further than Hendrick Cadillac Southpoint for financial assistance. Our team of finance professionals are here to help. If you’re financing a new or used car with set monthly payments but are interested in the benefits of paying off your loan early, let one of our experts guide you through the process of discovering your payback options. No matter what plan you’re currently on for leasing your car, we’ve got someone here to provide personalized guidance based on your financial situation. First, let’s look at what’s involved with paying off a car loan early to help you determine what’s best for you.

Is it Good to Pay Off a Car Loan Early?

When paying off a car loan early, it requires strong financial planning and budgeting skills. The good news for Raleigh drivers is you can receive an overall lower interest rate, a lower debt-to-income ratio, and can achieve financial freedom by securing the car as completely yours.

When Paying Off a Car Loan Early Makes Sense

• If you have little to no debt
• If you’ve saved enough money and your budget will allow you to make larger monthly payments than you’re currently paying
• If paying more now won’t negatively impact your overall financial planning for the future
• If you’re seeking lower monthly payments in order to plan for larger financial goals such as buying a home, moving, or planning for retirement
• If you’re wanting to lower your debt-to-income ratio

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

• When you don’t have enough funds set aside for emergencies
• If you currently have a great interest rate, you might be better off using your extra funds to secure future financial goals
• If making monthly, on-time payments is helping you build stronger credit, which will benefit your financial situation in the long run
• If your current loan plan has early or prepayment restrictions and penalties that you should avoid

How to Pay Off a Car Loan Early

When it comes to paying off your car loan early, there are several actions you can take. Here are a few options to consider that will help you determine if paying off your car loan early is right for you:

• Pay half your monthly payment every two weeks: this might seem like you’re paying the same overall amount, but by dividing your monthly payment into biweekly payments, you will end up making 26 payments, which equals 13 full monthly payments rather than 12 if you just pay monthly.
• Round up: it’s that simple. Simply round up to the nearest $50 every time you make a payment and this will incrementally increase your overall payment.
• Make one large extra payment each year: instead of rounding up each month, make one large lump sum payment every year. If you get an annual bonus, this might be a great option for you.
• Don’t skip a payment: even if your lenders permit you to skip one or more payments each year, don’t. Stick to your repayment plan to keep your interest from increasing.
• Refinance your loan: if you’re in good standing with your lender, and have already made at least a year’s worth of payments, you might consider refinancing your vehicle. But only do this if you’ll be receiving a lower monthly payment and interest rate.

Learn More with Hendrick Cadillac Southpoint!

Like many other Cary drivers, you might be wondering how to pay off your car loan early. Or if you’re thinking about refinancing for lower monthly payments, applying online is easy. Contact one of our finance team members at Hendrick Cadillac Southpoint today and let us help you determine the best track for early repayment. If you’re in a different situation and are wondering how to trade in a car that isn’t paid off, we can offer advice for this, too.