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Can you pay off your car loan early?
Find out if you can save time and money by repaying your car finance early.
Like other types of loans, car loans generally require you to make repayments over a set period of time. However, some lenders may allow you to make additional repayments or pay off your car finance early.
If you’re considering a car loan and want the ability to pay it off early, read our guide to see which loans allow you to do so, and if there are any fees you’ll need to pay.
What is the benefit of paying your car finance off early?
Repaying your car loan early can help lower the cost of your loan by limiting the amount of interest you pay. However, if you are in a position to repay your car loan early, you should always consider if any penalties or fees will apply. The cost of these may be bigger than the savings you would make from repaying the loan early.
How do early repayments work?
There are a few different types of early repayments:
- Additional or lump sum payments. These are made during the loan term and do not result in your loan being repaid in full. Lenders still may place restrictions on these payments, especially with fixed rate loans.
- Repaying your entire loan amount during a fixed rate period. This is where you will find the most restrictions applied. Repaying your entire loan early in this scenario involves paying whatever the loan balance is due to the lender during a fixed rate period, or where a fixed rate already applies to a loan. Here, break costs and administration fees are likely to apply to help the lender cover costs lost to them.
Which finance lenders allow early repayment?
|Brand||Car loan(s)||Can you repay early without penalty?||Fees that apply|
|AA Money||AA Money Car Loan||No fee applies.|
|Admiral Finance||Admiral Car Loan||$40 may be charged for early settlement unless the loan is nearly complete. No fee applies for loans taken out after 1 July 2017.|
|ASB||ASB Car Loan||No fee applies.|
|Geneva Finance||Geneva Finance Car Loan||$15 full prepayment fee applies when loan is settled early.|
|Harmoney||Harmoney Car Loan||No fee applies.|
|Heartland Bank||Heartland Bank Car Loan||$7 early settlement fee applies, will be debited to the account when settled in full before its loan term.|
|Kiwibank||Kiwibank Car Loan||No fee applies.|
|MyFinance||MyFinance Car Finance||$100 administration costs charge applies when you repay a loan in full before the final payment is due.|
|QuickLoans||QuickLoans Car Loan||No fee applies|
|Swoosh Finance||Swoosh Finance Car Loan||Extra charge applies which is calculated at the time the loan is repaid in full.|
|UDC||UDC Car Loan||$7 administration fee plus early prepayment charge that will be calculated by UDC.|
|Westpac||Westpac Car Loan||No fee applies.|
|Simplify||Simplify Car Loan||$150 variation fee applies if you make an unscheduled part prepayment on your loan.|
|Nectar||Nectar Car Loan||No fee applies.|
|Lending Crowd||Lending Crowd Car Loan||No fee applies.|
|The Lending People||The Lending People Car Loan||Early settlement fees vary with lender.|
What else should I know about car finance repayments?
Your car loan repayments will affect how you deal with your loan, so examine them carefully. Before you send through an application, make sure you have considered:
- How often you make repayments. Lenders usually give you the option of making weekly, fortnightly or monthly repayments. This lets you line up payments with your budget.
- The flexibility of the repayment options. Check whether you are able to make additional repayments without penalty or if there is a cap on how many additional payments you can make.
- How you need to make repayments. Repayments are usually direct debited out of your account automatically. But you may be given other options for making repayments or to pay off your car loan early; such as electronic transfer or an in-branch deposit.
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