Paying Off Your Car Loan Early: Is It a Good Idea?

The shorter your car loan term, the less you’ll pay in interest overall. So, is it good to pay off a car loan early? For Port Huron drivers who are able to make higher monthly payments, paying off a car loan early can open up your budget to new opportunities and lower the total interest owed on your car loan. However, your loan agreement may require you to pay a fee for ending your loan agreement before the end of the original term. Looking for tips and tricks for how to pay off a car loan early? Read the guide below from the Moran Blue Water Chrysler Dodge Jeep Ram finance center, and don’t hesitate to contact us with any further car-buying questions!

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

Whether it’s good to pay off a car loan early depends on several factors: the terms of your loan agreement, and your unique financial situation. Paying off your car loan early could be a smart move if:

• You want to pay less interest. Paying more than necessary toward your loan each month will shorten the loan term. As a result, you’ll end up with fewer monthly interest payments and less interest owed overall.
• You can easily afford the higher monthly payments. It is good to pay off your car loan early, but only if doing so doesn’t strain your budget. Late payment can seriously impact your credit score, and it’s preferable to avoid paying your car loan with credit.

Depending on your situation, it’s not necessarily good to pay off a car loan early. You should consider waiting till the end of your loan term if:

• You’re looking to raise your credit score. It’s actually better for your credit score to leave your car loan open for the full term. That’s because paying off a loan early results in an abrupt drop in available credit — and using a larger portion of your available credit will very likely cause your score to drop.
• You’d like to avoid early termination fees. Your loan agreement or lender may require you to pay the remaining balance on the lease or the cost of any repairs needed to satisfy your lease agreement for paying off the car loan early.

How to Pay off a Car Loan Early and Save On Your Next Purchase

Paying off your car loan early may allow you to put down money on a second car or other purchase right now, rather than waiting for the end of the term. Like many Saint Clair drivers who pay off their car loans early, you may also choose to pay off your loan and then trade in your car for a new model. You’ll be able to apply the trade-in value to your next purchase! Your dealer might allow you to trade in your financed car before the end of the loan term — just contact our finance center for details!

Learn How to Pay Off a Car Loan Early in Fort Gratiot 

At Moran Blue Water Chrysler Dodge Jeep Ram, we strive to make buying your next car simple, streamlined, and stress-free. Contact us anytime — or visit our dealership near Marysville — if you have questions about lease buyouts, bad credit car loans, and other car-buying topics. We’re here to help!