Paying Off a Car Loan Early

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Auto loans are an important part of buying a new or used Hyundai. By making monthly payments, you can get the right car for your commutes and adventures around Denver at an affordable price. However, it’s possible to get ahead of schedule on your car loans. You may be wondering, is it good to pay off a car loan early? Yes! If paying off your car loan early is the right option for you, follow this guide from Planet Hyundai for benefits of an early pay off and tips for how to pay off a car loan early. Contact us with any questions you have along the way!

Advantages for Paying Off a Car Loan Early

Taking steps to paying off a car loan early takes a carefully planned budget and the motivation to stick to a plan, but drivers can see a lot of rewards. It can allow Lakewood drivers to pay lower interest, see a lower debt-to-income ratio, and come closer to financial freedom. Consider these factors when deciding if it is a good option to pay off a car loan early.

Consider paying off a loan early:

  • If there is little to no other debt open and borrowers want to free the budget for other expenses. 
  • If there is extra room in the budget and borrowers have the ability to make larger monthly payments that won’t affect the current budget. 
  • If the borrower wants to lower future expenses and plan ahead for larger financial and life goals like retirement or expanding the family. 
  • If the borrower wants to improve the debt-to-income ratio.

Hold off on paying a loan early:

  • If there are no extra funds prepared in case of an emergency. 
  • If the interest rate is very good. It may be a good idea to continue paying off the loan at the current rate and the money intended to pay off the loan can be put into a savings or retirement account. 
  • If a credit score and credit history needs to be established. The monthly payments can help build a history of timely payments and raise a credit score. 
  • If there is a prepayment penalty attached to the loan. Verify with the lender to ensure none of the terms are violated with paying off a loan early. 

How to Pay Off a Car Loan Early

Has it been determined that it is a good idea to pay off a car loan early. Follow these steps for finding the right method for how to pay off a car loan early:

  • Bi-Weekly Payments: Verify with the lender if bi-weekly payments are possible. Then, divide the monthly payments in half, and make the payment every two weeks. Get ahead in the loan by making 13 full car payments a year instead of the typical 12. 
  • Rounding Up the Monthly Payment:  Round up the payment to the nearest $50 each time a payment is made to incrementally bring down the loan amount. 
  • Make One Extra Payment Each Year: Instead of rounding up, add in one extra payment each year for the same interest savings.
  • Refinance the Car Loan: If full and timely payments are made within the first year or two, Arvada drivers can consider asking for a refinance. However, only refinance if it offers a lower interest rate. It gives drives a chance to lower the monthly payment going forward and give the budget more room. 

Explore Your Car Buying Options with Planet Hyundai! 

Is it a good option for you to pay off your car loan early? Contact the team in our finance center for more information about auto loans or the car buying process in general. Wondering what’s a good mileage on a used car? Or what liability insurance actually covers?

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