Can I Pay Off My Car Loan Early?

No one likes to stay in debt, especially if they can avoid paying all the interest that comes with monthly payments. That’s why a lot of Myrtle Beach car owners have chosen to pay off their cars ahead of schedule. But is it good to pay off a car loan early? Paying off a car loan early can be a smart financial move, but there are a few key factors to consider first. Our finance department wants you to make informed decisions, so let’s talk about that in more detail, as well as how to pay off a car loan early the right way.

Is It Good to Pay Off a Car Loan Early?

A lot of Charleston drivers can’t wait to be free of car payments, but is it good to pay off a car loan early? If you don’t have a better place to put extra funds or want to be debt-free ASAP, paying off a car loan early often makes sense. But weigh your full financial picture first. Here are some of the key pros and cons to consider:

Pros

• Save money on interest payments over the life of the loan
• Own your car free and clear sooner
• Improve your debt-to-income ratio
• Free up cash flow going forward

Cons

• Missing out on potential investment returns
• Lose some tax deductions for interest paid
• No flexibility if you need cash later

Paying Off a Car Loan Early: Fees

Some lenders charge prepayment penalties for paying off a car loan early. This fee is usually a percentage of the remaining balance. Ask your lender before making extra payments to avoid surprises. Many auto loans today do not have prepayment fees. You may also want to confirm there are no annual or monthly maintenance fees. This could negate some of the savings from prepaying. Make sure you have all the facts before deciding if paying off your car loan early aligns with your financial goals.

How to Pay Off a Car Loan Early the Right Way

Carefully consider both the benefits and drawbacks before choosing the early loan payoff plan that best fits your needs and budget. Here are three options if you decide paying off your auto loan early is right for you:

• One-time lump sum payment – Use a tax refund, inheritance, or other windfall to eliminate the balance entirely. This requires discipline to save up the funds rather than spending them elsewhere.
• Recurring extra payments – Add an extra $100 or more to your regular monthly payment. This incremental approach takes discipline too, but can pay big dividends over time.
• Refinance for a lower rate – If your credit has improved, you may qualify for a lower interest rate. Refinancing could lower your monthly payment and help you pay off the balance faster.

Visit Hadwin-White Subaru of Conway to Start Fresh

If you’re ready to pay off your current car loan fast and start fresh with a new Subaru, visit Hadwin-White Subaru today. Our finance experts can explore your options for getting approved for the lowest monthly payment. In fact, you can get started right now by getting pre-approved for financing. You might also find it helpful to look over our other financing tips. Remember, we’re conveniently located near Columbia. So, drop by or contact us today.