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Can I Pay Off My Car Loan Early?

Car Loan

Sometimes you get a little extra windfall, or maybe you’re budgeting better so you’ve got a little extra cash each month and you might be wondering if it is good to pay off a car loan early. If you’re considering paying off your car loan early, you may have questions. At South Bay Mazda, our Redondo Beach neighbors frequently ask us questions like how to pay off a car loan early, and whether it is good to pay off a car loan early. If you’re considering paying off your car loan early and have similar concerns, read our handy guide. Then, contact South Bay Mazda to talk to a financier in Torrance!

How to Pay Off a Car Loan Early

There are a few methods you can follow if you’re considering paying off your car loan early. Take a look to determine which route makes the most sense for yourself:

  • Pay Every Two Weeks: If you make a payment every two weeks, rather than once a month, you make one additional payment each year.
  • Round Up: Round up to the nearest $50 each time you make a payment.
  • Make Additional Payments: Next time you get a windfall, use some of it to make additional payments to speed up the process of paying off your loan.
  • Refinancing: If you’ve made reliable payments on your car over the past two years, you’re likely eligible to refinance your car loan through another lender and bargain for a lower interest rate.

Is it Good to Pay Off a Car Loan Early?

For most Manhattan Beach drivers, paying off a loan early is a good idea. After all, if you pay your loan off early, you’ll have less overall interest on your vehicle. To determine if it’s the right decision for you, review some signs that paying off a loan early is and isn’t a good idea:

Pay Your Loan Off Early If:

  • You don’t have more important debts to take care of, like unpaid credit card bills, personal loans, or any loan with higher interest rates than your current auto loan.
  • You already have substantial savings and are covered in the event of an emergency.
  • If you’re attempting to free up your budget so you can plan for a bigger, more urgent financial goal.
  • You’re trying to improve your debt-to-income ratio.

Consider Other Options If:

  • You don’t have an emergency fund.
  • Your auto loan has a low interest rate, and the monthly payment is relatively gentle on your monthly budget. In this case, your money is probably better served if put towards your retirement savings.
  • You’re attempting to build credit by reliably making payments on a large loan.
  • Your auto loan agreement stipulates that breaking your contract early will result in prepayment penalties.

Have Questions About Paying Off Your Car Loan Early?

Whether you have questions about how to pay off a car loan early, if it is good to pay off a car loan early, or you’d like a consultation with South Bay Mazda, reach out to our Torrance dealership. Our finance department is here to help answer all of your questions you might have about car buying tips, as well as more ways to save money! From new vehicle specials to the difference between buying and leasing, you’re here to help you make sure you’re staying within budget and enjoying your new vehicle for years to come.

 

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