Is It Good To Pay Off a Car Loan Early?

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Paying off a car loan early is always a dream. When you can finally put down that fine bit on the loan and prevent any more interest payments it can make you feel good. But there are some things you’ll need to keep in mind and be aware of before you drive through Camp Lejeune in a paid off car. The impact on your credit score, any early payoff penalties that your lease might have, other debts you might have, and your budget are all things you need to consider when looking at how to pay off your car loan early.

When You Should Pay Off Your Car Loan Early

The idea of paying off your car loan early is always going to feel like the right thing and why shouldn’t it? You’re freeing up funds for use elsewhere or to save money, but you might not be getting the best benefit.

Benefits to Paying Off Your Loan Early:

  • Freeing up funds: You won’t have to worry about paying off your loan each month, which could be hundreds of dollars freed up! These could be used to pay off other debts, put away for other purchases, or put into a rainy day fund, or just for a fun celebration around Richlands.
  • Avoid paying more than your car is worth: Cars can depreciate over time due to wear and tear, mileage, accidents, and just time. If you are paying your loan for too long, you may end up paying more in the long run than your car is worth.
  • Paying off a high interest loan: If your car loan has a high interest rate, paying it off early will save you money in the long run. When you make your monthly payments, you’re paying off both the principal and interest that has accrued. With a high interest loan, you’re going to have to pay either a higher amount each month or for a longer period of time.

But while those are all great reasons to talk to your lease provider about how to pay off a car loan early, there are some negative consequences you may want to consider.

Important Factors to Consider

  • Open Loans Weigh More: While paying off your loan may not cause any negative effects to your credit score, it may be more beneficial in the long run to keep the account open. Each on-time payment after all increases your credit score, which in turn could lower interest rates on future loans.
  • Prepayment Penalties: Some loans may include a fee you have to pay when a loan is paid off early. The terms of your loan should have this information, so make sure you look.
  • Other debts: Some debts may be worth paying off first instead of an auto loan. Loans with higher interests should be prioritized first.
  • Monthly Budget: Don’t push yourself if you are on a budget. Paying extra money off of a loan may leave you stretched too thin. This is especially important if you don’t have a secure emergency fund.

Let Marine Chevrolet Help You With Your Loan

When it comes to answering questions such as is it a good idea to pay off a loan early, to shopping for a new or used car, the experts at Marine Chevrolet are here to help you. Call today to speak to the finance team, or come into the Sneads Ferry dealership for the wonderful in person expertise. Also be sure to learn more about refinancing a car loan!

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