Paying Off Your Car Loan Early

Most Provo drivers who obtain financing on a new or certified pre-owned vehicle from Orem Toyota end up with a 72-month commitment to making monthly payments. Paying off your car loan early not only substantially decreases the months it takes to satisfy the loan but also nets you a significant amount of savings on the total investment. Is it good to pay off a car loan early? Learn the answer directly from the finance department at Orem Toyota.

Finance

How to Pay Off a Car Loan Early

There’s more than one way of paying off a car loan early. Depending on your budget, one of the following methods may work better than the other:

Use Unexpected Financial Gains: If you receive monetary gifts, unexpected refunds, prize earnings, or special rebates, put these unbudgeted income additions towards your loan.
Refinance Your Current Auto Loan: Your credit score improvements and relationship with your lender could lead to a restructured loan with better rates and early pay-off.
Make An Additional Payment Over the Loan Term: Making an additional payment beyond your monthly obligation significantly reduces the principal and interest amount.
Make One Large Lump-Sum Payment Each Year: If you can afford it, make an additional lump sum payment each year.
Rounding Up: Round up each time you make your monthly payment. If your typical monthly payment is $325, round up to $350, or even $400, if you can afford it. This additional amount goes straight to the principal.
Pay 50% of Your Monthly Payment Every Two Weeks: For example, if your payment is $300 per month, make a $150 payment two weeks after your expected payment date.
Never Skip: Don’t get into the habit of skipping payments. Each time you skip a payment, you extend the payoff date and put a negative remark on your credit report.

Is Paying Off a Car Loan Early a Smart Move?

Paying off a car loan earlier than expected takes a little strategy, but your diligence is rewarded with significant savings and life-changing credit ramifications. However, it’s important not to overextend yourself financially by trying to satisfy your loan requirements faster.

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

You are in a favorable position financially to allocate an additional portion of your budget toward your vehicle
You suddenly experience a reduction in monthly payments in another area
You’re budgeting for a larger financial goal
You’re attempting to lower your debt-to-income ratio to improve your credit score

When Paying Off a Car Loan Isn’t Advisable

You don’t have the additional funds available to commit.
If your interest rate is already at an ideal rate, the amount you would save is marginal. The extra money might be better served for another investment.
You’re using your car payments to build a positive payment history and build credit
When your loan agreement contains prepayment penalties

Consult Our Expert Finance Team at Orem Toyota

For many Lehi drivers, learning how to pay off a car loan early provides substantial savings. However, sometimes it’s more beneficial to stay the course. Our finance department at Orem Toyota is available to help you navigate the terms of your auto loan, value your trade, and provide options after your lease expires for Draper drivers who didn’t finance a purchase. Contact us today!

Learn More with Orem Toyota!

Is it good to pay off a car loan early? For many Draper drivers, the answer is yes! If you’d like more information on how paying off your car loan earlier than planned can save you money, contact us at Orem Toyota. We’re always happy to provide car buying tips you can trust!