Is it Good to Pay Off a Car Loan Early?

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If you’re looking into paying off a car loan early, congratulations! Before you send a lump sum off to your lender, take a look at some things you should know about how to pay off a car loan early. The finance experts at Honda of Watertown are here with answers to questions about how to pay off a car loan early, and if it’s good to pay off a car loan early. 

Paying Off a Car Loan Early: Is it Right for You? 

Before you decide how to pay off a car loan early in Waterbury, you really need to discuss it with a financial advisor who can help you decide if paying off a car loan early is right for your financial future. Here are some things to consider: 

When Does Paying Off a Car Loan Early Makes Sense

For Southbury drivers who don’t have other, higher-interest debt, and who won’t deplete their savings by paying off a car loan early, this is a great way to lower outgoing expenses and improve their debt-to-income ratio. As long as paying off your car loan early won’t affect your lifestyle or savings, it’s a good idea. 

When Paying Off a Car Loan Early Isn’t the Best Option

Sometimes paying off your car loan early isn’t the best option. If it depletes your savings, or you’re working to build your credit rating, paying off your car loan early might not be the right plan for you. Also, some car loans contain penalties for early payment. Make sure you’re aware of any prepayment penalties before you proceed.

How to Pay Off a Car Loan Early

You have several options when it comes to how to pay off your car loan early in Torrington. Always discuss your early payment plans with your lender to make sure you’re not going to incur any penalties. 

  • Make Bi-Weekly Payments: If your lender allows this, divide your full monthly amount into two, and make that your payment every two weeks. You will make thirteen car payments instead of twelve for the year.
  • Round-Up Your Payment Each Month: If you choose this method, rounding up to the nearest 50 dollars is your best bet. 
  • Make One Lump Sum Extra Payment: To achieve the same interest savings as if you did round up your payment, pay a lump sum—a one-time extra payment that is a large amount towards your car loan every year.
  • Refinance with a New Car Loan: Do this only if you will get a better interest rate than you had with your previous car loan. This will make for lower monthly payments. You can adjust the terms of your loan to pay it off faster or combine refinancing with any of the above methods. 

Learn More about Car Financing near Waterbury with Honda of Watertown!

Yes, it is good to pay off a car loan early, if you use this information from Honda of Watertown! You can count on our finance department for all the information you need about automotive finance, like how to benefit from buy here, pay here. If you have any questions, just contact us!

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