2021 Jeep Wrangler on the highway

How to Pay off a Car Loan Early

If possible, paying off car loan early can lead to several benefits, but depending on your financial situation simply making your payments on time could be a better option. Whether you aspire to a new vehicle or are looking to take advantage of the financial advantages of a pre-owned car, Nyle Maxwell CDJR of Taylor has you covered with car buying tips and straightforward financing offers.

 

 

Is it Good to Pay Off a Car Loan Early?

There are many Cameron and College Station who want to know “is it good to pay off a car loan early?” The answer is that it depends on your situation. If paying off the loan early is well within your means, it can save you money in the long run and reduce stress. But, depending on the loan, it can also lead to penalty fees. Here are the pros and cons:

Advantages of Paying Off a Car Loan Early

  • If you have the means to do so without depleting your savings, paying off your car loan can give you greater financial freedom.
  • If you want to improve your debt-to-income ratio, this can help you with other big investments like mortgages.
  • If you want to reduce your monthly expenses, paying your car loan early can help you save more for other expenses like retirement.

Disadvantages of Paying Off a Car Loan Early

  • If paying off your loan early will strain your finances, the trade off is generally not worth it.
  • If you have a really good interest rate already, it might make more sense to continue to pay off your loan on the scheduled time table.
  • If you are trying to build your credit score, it’s a better idea to continue making your prompt payments as usual.
  • If your car loan agreement includes prepayment penalties, be sure to weigh those extra fees into your budgeting.

How to Pay Off a Car Loan Early

If you decide paying off your loan early is a good decision, here are some ways you can more easily do that:

  • Bi-Weekly Payments: If you divide your monthly payment in half, and pay that amount every two weeks, you will pay 13 full payments per year. This is up from 12.
  • Round Up: Rounding up your payments instead of paying “exact change” can get things done quickly. Whether rounding up to the $10 increment, $50 increment, or any other increment, it will add up.
  • Extra Payment: An extra payment at any time in the year, such as at the end of the year, can jump you ahead.
  • Refinance: After paying on time for two years, you can refinance your loan. This can grant you a lower interest rate, saving you money and adding further potential to pay the loan off early.

More Financial Information with Nyle Maxwell CDJR of Taylor

If you have any questions about financing your new or used vehicle near Georgetown, don’t hesitate to contact us!

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