Can I Pay Off My Car Loan Early?

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If you’re considering paying off your car loan early, you may have questions. At Hillside Chevrolet Buick GMC, our Stratford neighbours frequently ask us questions like, “Is it good to pay off a car loan early?” and “What are the steps of how to pay off a car loan early?”. If you’re preparing to pay off your loan early and have similar concerns, read our handy guide. Then, contact Hillside Chevrolet Buick GMC to talk to a financier in Charlottetown!

How to Pay Off a Car Loan Early

There are a few methods you can follow to pay off your car loan early. Take a look to determine which route makes the most sense for yourself:

  • Pay Every Two Weeks: If you make a payment every two weeks, rather than once a month, you make one additional payment each year. 
  • Round Up: Round up to the nearest $50 each time you make a payment.
  • Make Additional Payments: Next time you get a windfall, use some of it to make additional payments to speed up the process of paying off your loan.
  • Refinancing: If you’ve made reliable payments on your car over the past two years, you’re likely eligible to refinance your car loan through another lender and bargain for a lower interest rate.

Is it Good to Pay Off a Car Loan Early?

For most Cornwall drivers, paying off a loan early is a good idea. After all, if you pay your loan off early, you’ll have less overall interest on your vehicle. To determine if it’s the right decision for you, review some signs that paying off a loan early is and isn’t a good idea:

Pay Your Loan Off Early If:

  • You don’t have more important debts to take care of, like unpaid credit card bills, personal loans, or any loan with higher interest rates than your current auto loan.
  • You already have substantial savings and are covered in the event of an emergency.
  • If you’re attempting to free up your budget so you can plan for a bigger, more urgent financial goal.
  • You’re trying to improve your debt-to-income ratio.

Consider Other Options If:

  • You don’t have an emergency fund.
  • Your auto loan has a low interest rate, and the monthly payment is relatively gentle on your monthly budget. In this case, your money is probably better served if put towards your retirement savings.
  • You’re attempting to build credit by reliably making payments on a large loan.
  • Your auto loan agreement stipulates that breaking your contract early will result in prepayment penalties.

Have Questions About Paying Off Your Car Loan Early?

Whether you have questions about how to pay off a car loan early, if it is good to pay off a car loan early, or you’d like a consultation with Hillside Chevrolet Buick GMC, reach out to our Charlottetown dealership. Our phone number is 833-914-1419. We’ll walk you through everything you need to know and help you navigate your options. In the meantime, explore our car buying tips for other helpful reads, including our more general overview of how car financing works.

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