Paying Off a Car Loan Early

Is it good to pay off a car loan early? While many Troy drivers stick to the regular schedule, others prefer to speed up the process. Paying off a car loan early can be a good option for some, but it’s not always in your best interest. That’s why Cooley Mazda is here to go through the pros and cons. Not only will we help you determine whether paying off a car loan early is your best option, but we’ll help you figure out how to pay off a car loan early in the best way possible. 

What to Know When Paying off a Car Loan Early

So, is it good to pay off a car loan early in Albany? The answer can be yes, but you’ll need to take inventory of your personal financial situation first. So before committing to anything, you’ll need to gather the following information:

• What is the overall interest paid on your current loan?
• Are you or will you become upside down on your loan?
• What is your debt-to-income ratio and can you improve it?

Pros and Cons of Paying Off Your Loan Fast

When It Makes Sense

• Your debt level is low, or you might not even have any debt at all.
• You have a good amount in savings that you can use toward the loan.
• You have other financial goals that you’d prefer to work towards.
• You want to improve your debt-to-income ratio.

When It Doesn’t Makes Sense

• You have other debts.
• You do not have extra savings for emergencies.
• You want to take the time to build credit.
• Your lender has early payment penalty fees.

How to Pay off a Car Loan Early

Let’s say you’ve decided that paying off a car loan is a good move for you. How do you accelerate the payment process? You have many different options.

• If your lender allows it, make bi-weekly payments. This will help you get 13 payments in during the year instead of 12.
• Round up your monthly payments by $50 or so to boost your monthly contribution.
• Make one lump sum payment sometime during the year to bring down your loan.
• Avoid skipping payments, even if your lender allows it. This will extend the length of your loan – which adds more interest.
• Consider refinancing if you have a good payment history. However, only refinance if you can get a lower interest rate to lower your monthly loan. Then, put the money saved toward your loan.

Explore Your Options with Cooley Mazda

Learning how to pay off a car loan early takes a little preparation, but it can bring your closer to your financial goals if you play your cards right. Contact us at Cooley Mazda to find out your options. We’re located in Rensselaer, a short drive from Latham, so feel free to stop by to chat with our experts.