How Does Paying Off Car Loans Early Work?

Interested in buying a new or pre-owned vehicle at Brown Dodge Chrysler Jeep Ram? Planning on financing your latest car purchase with an auto loan? You’ll be expected to complete a set payment each month in order to pay off your loan on time. However, some Devine drivers prefer paying off car loans early rather than paying the set monthly payments. Is it good to pay off a car loan early? The finance specialists at Brown Dodge Chrysler Jeep Ram certainly think so. Find out how the early car loan payment process works, when the best time is to pay off your car loan early, and more finance tips with the experts below! 

When Is it Good to Pay Off a Car Loan Early?

• You’re looking to improve your debt-to-income ratio
• You are attempting to lower your monthly expenses to plan for a larger financial goal, such as entering retirement or growing your family
• You have enough extra funds saved up or enough wiggle room in your budget that making larger monthly car payments won’t affect your emergency funds and other finances
• You have little or no other debts to take care of and would like to get your car loan paid off, so you can free up money for other expenses

When Is it Bad to Pay Off a Car Loan Early?

• Some car loan agreements include prepayment penalties. If this is the case, you would of course want to avoid those penalties by adhering to your regularly scheduled payment amount. 
• You’re using your on-time, set monthly payments to build your credit history or raise your credit score.
• If you have an excellent interest rate, it may be smarter to just continue making on-time payments in the agreed-upon monthly amount. The money you’d use to pay your loan off early could be better served if you set it aside in a retirement fund or for a future financial goal, such as a mortgage.
• You don’t have many extra funds set aside for emergencies.

How to Pay Off a Car Loan Early

Although there are a number of great ways to pay off a car loan early, we’ve outlined the three best options for Uvalde drivers below: 

• Refinance with a New Car Loan – Once you’ve made one or two years’ worth of on-time, in-full payments, you might be a good candidate for refinancing. Of course, you should only refinance if it’s securing you a lower interest rate. The lower interest rate will reduce your monthly payment, making it easier to pay more than what’s required each month, so you can pay off your loan early.
• Make Bi-Weekly Payments – Check with your lender first to ensure it’s okay to use this technique. Divide your monthly car payment by two, then make that payment amount every two weeks. Using this method, you will effectively be making 13 full payments per year rather than 12. 
• Round-Up Your Payment Each Month – Each time you make a monthly payment, round up the amount to the nearest $50.

Find Out More About How to Pay Off a Car Loan Early with Brown Dodge Chrysler Jeep Ram

If you’re interested in paying off car loans for your Chrysler, Dodge, Jeep, Ram vehicle early, you have a variety of methods at your disposal! Don’t let budgeting concerns and stressful payment plans deter you from a new car purchase, reach out to us at Brown Dodge Chrysler Jeep Ram for help! We’re more than happy to provide you with car buying tips and advice to take the stress and hassle out of the vehicle purchasing process.