7 tips to pay off your car loan early | finder.com

Can you pay off your car loan early?

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Strategies you can use to save on your next car loan.

When you’re in a financial situation that allows you to pay off your car loan early, you might be able to save serious money on interest. But that’s not always the case. There are a few of factors to consider before you jump in.
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    Can I pay off a car loan early?

    It depends on your lender, but generally you can pay off your car loan early. Paying off your car loan early can cut down on the total cost of your loan because it gives less time for interest to add up.

    However, some car loans come with precomputed interest, which means you’ll pay the same amount no matter how much time you take to repay your loan. In these cases, paying off your car loan early can only get you out of debt faster.

    7 strategies to pay off a car loan early

    1. Refinance your loan. If you find yourself in a better financial position, with a strong credit score, you could refinance your loan to get a shorter term with better rates, paying off your debt in a fraction of the time.
    2. Make additional payments. If allowed, try to make additional payments whenever possible. Making payments every other week adds one extra payment at the end of the year, helping you save on interest.
    3. Make lump sum payments. Try to make a few large payments per year when you get extra cash from a bonus, tax refund or pay raise.
    4. Get a side gig. Working a few extra hours on the side can help you save up the cash you need to pay off your car early.
    5. Renegotiate your car insurance. There could be additional savings if you start comparing other car insurance options, especially if you have a record of good driving. Then just apply the money you save and put it towards your car loan.
    6. Sell your stuff. Make a list of personal items that you haven’t used in a long time and determine if you need them anymore. You may find that they’d be better as cash in your hand then taking up space in your home.
    7. Don’t skip payments. Even if you don’t owe any interest right now and don’t need to make a payment it’ll still add up and could cost you more money.

    Which lenders let me pay off my car loan early?

    Loan ProviderCan you repay loan early without penalty?Fees that apply for early repayment
    Auto Credit ExpressVaries by lenderVaries by lender
    car.Loan.comVaries by lenderVaries by lender
    myAutoloan.comYesNone
    LendingTreeVaries by lenderVaries by lender
    CarsDirectVaries by lenderVaries by lender
    SpringboardautoYesNone
    Bluesky Auto FinanceNot statedNot stated
    RoadLoansYesNone
    CarFinance.comYesNone

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    Rates last updated November 13th, 2018

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    Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
    Name Product Product Description Min. Credit Score Term of Loan Requirements
    car.Loan.com Car Loans
    Apply with a simple online application to get paired with a local auto lender. No credit and bad credit accepted.
    300
    Varies by lender
    Must be a US citizen with a current US address and employed full-time or have guaranteed fixed income.
    Auto Credit Express Car Loans
    Get connected with an auto lender near you, even if you have bad credit.
    300
    Typically 3 to 6 years
    Must be employed full-time or have guaranteed fixed income of at least $1,500/month and be a current resident of the US or Canada.
    LightStream Auto Loans
    Quick car loans from $5,000 to $100,000 with competitive rates for borrowers with strong credit.
    Good to excellent credit
    Flexible terms
    Good or excellent credit, enough income or assets to afford a new loan, US citizen or permanent resident, 18+ years old
    RateGenius Auto Loan Refinance
    Connect with a network of over 150 lenders to refinance your car loan.
    510
    Varies
    Income of $2,000+/month, vehicle has less than 150,000 miles, no older than 10 model years, loan balance is at least $10,000, debt-to-income ratio: less than 50%.
    LendingClub Auto Refinancing
    Lower your monthly car payments and save on interest through a fast and easy online application process.
    Fair or better credit
    Minimum of 2 years
    Car must be less than 10 years old with fewer than 120,000 miles. Current loan must have a balance between $5,000 and $55,000 and at least 24 months left in its term.
    MotoRefi Car Loan Refinancing
    A car loan connection service for borrowers looking to refinance.
    525
    1–6 years
    Must have an income of at least $2,000/month and have a vehicle with less than 100,000 miles.
    LendingTree Auto Loans
    Compare multiple financing options for auto refinance, new car purchase, used car purchase and lease buy out.
    Good to excellent credit
    Typically 1 to 7 years
    Must be a US citizen and 18+ years old. Must have good to excellent credit.

    Compare up to 4 providers

    How do early repayments work?

    Before you take out a car loan, check with the lender to see what penalties or fees it charges for early repayment. Many car loans use your car as collateral and come with a fixed interest rate. In this case, lenders might place restrictions or fees on early repayments — or won’t allow it at all.

    If you can make extra payments or pay your loan off early, there are two different approaches:

    • Repaying a variable-rate loan. Lenders generally place fewer restrictions on car loans with variable interest rates. Since lenders generally don’t lose much money from early repayment, you likely won’t have to worry about early termination fees.
    • Repaying a fixed-rate loan. Repaying your entire loan involves paying whatever the loan balance is due to the lender during a fixed-rate period. Here you’ll likely pay termination and administration fees that the lender uses to cover its lost interest.

    What else should I know about car loan payments?

    Your car loan payments will affect how you deal with your loan, so examine them carefully. Before you send a new loan application, make sure you’ve considered the following factors.

    Bottom line

    Making additional payments on your loan can be a helpful option that can help you save down the road, but it’s not the only feature that lenders have to offer — and it’s not always guaranteed to save you money. Remember to compare car loans, taking into consideration fees, features and rates to find the right one for you.

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