Can I Pay Off My Car Loan Early?
If you’re considering paying off your car loan early, you’re likely wondering:
- Is it good to pay off your car loan early?
- How can I pay off a car loan early?
For answers, read on for a comprehensive overview of early loan pay-offs for help with deciding whether this path is right for you. Then, reach out to the Sandy or National Auto Plaza locations for help!
Is it Good to Pay Off a Car Loan Early?
Paying off a car loan early can be a sensible option for Draper drivers. Here are the most obvious benefits:
- Pay less interest
- Lower your debt-to-income ratio
- And avoid the possibility of ever going upside down on your loan
While paying off your loan early is generally a good thing, there are certain situations where it makes sense and where it doesn’t make sense.
When Does Paying Off a Car Loan Early Makes Sense:
- You don’t have more urgent debts to pay off.
- You already have a strong emergency fund saved up.
- You’re looking to free up your budget, so you can retire or expand your family.
- You need to improve your debt-to-income ratio.
When Paying Off a Car Loan Early Isn’t the Best Option:
- You don’t have a strong emergency fund saved up.
- You have a low interest rate and other, more urgent and demanding debts.
- You’re looking to increase your credit score, in which case you’ll want to continue making timely payments on your loan to build positive credit history.
- You think you might have to pay a penalty for paying your loan off early (consult with your lender).
How to Pay Off a Car Loan Early
If you’ve determined that paying off a car loan early is right for you, it’s time to develop a financial path. Here are the easiest and most convenient ways to pay your loan off faster:
- Make Bi-Weekly Payments: Reach out to your lender and see if you can shift to bi-monthly payments rather than monthly payments. If you do this, you’ll make 13 car payments every year, rather than 12.
- Refinance with a New Car Loan: If you’ve reliably made payments on your car over the past two years, you’re likely in a good position to refinance your car loan. This means that you’d apply for a loan with better interest rates from another lender and use the money to pay off your current loan.
- Rounding Up: Round your monthly payment up to the nearest 50 every month.
- Make One Lump Sum Extra Payment: Another way to achieve interest savings is to make one large, extra payment every year.
Learn More About Car Financing with National Auto Plaza
Now that Salt Lake City drivers are better versed in paying off a car loan early, if they think it’s a good option for them, they can call our financiers at for help. Our finance department can guide you through the next steps and answer any remaining questions about how to pay off a car loan early or whether it’s good to pay off a car loan early. If you have other questions about car buying, be sure to explore our site for helpful reads about in-house financing for used cars and insurance requirements for used vehicles.