Paying Off a Car Loan Early
Paying off a car loan early is an enticing option for many Raleigh drivers, but is it good to pay off a car loan early? Hendrick Buick GMC Cary is here to help you decide. While some drivers might enjoy long-term benefits from speeding up the payment process, others might find that it’s too much of a financial strain in the short term. Learn how to pay off a car loan early the right way with Hendrick Buick GMC Cary, and get in touch with our finance team for personalized advice.
Is it Good to Pay Off a Car Loan Early?
Paying off a car loan early can be a great choice for many Apex drivers, but it’s important to think strategically. Let’s take a look at the pros and cons:
When Paying Off a Car Loan Early Makes Sense
- You’d like to get your car loan paid off early, so you can free up funding for other financial goals like retirement or family planning.
- You don’t have any other major debts.
- You have an emergency fund in place, and your extra monthly payments won’t affect your finances.
- You want to improve your debt-to-income ratio.
When Paying Off a Car Loan Early Isn’t the Best Option
- You don’t have an emergency fund, and you worry that a larger payment could strain your monthly financial obligations.
- Your interest rate is exceptionally good. It might be more worthwhile to set aside extra money for a savings fund, rather than speed up your payment process.
- You’re using your loan payments to boost your credit score or history.
- You have prepayment penalties in your contract. These penalties can add up, and you might not benefit from paying off your car loan early.
How to Pay Off a Car Loan Early
If you’ve decided that this is the right choice for you, here are a few strategies of how to pay off a car loan early.
- Make Bi-Weekly Payments – Split your monthly car payment in half, then make that payment amount every two weeks. This allows you to easily make 13 full payments per year rather than 12.
- Round Up Your Payment Each Month – Each time you make a monthly payment, just round up the amount to the nearest $50.
- Make One Extra Payment Each Year in One Lump Sum – If you’d prefer not to round, you can choose to make one large extra payment per year to achieve the same interest savings.
- Resist the Temptation of Skipping a Payment – While lenders will let you skip a payment or two without penalties, be sure to stick with your schedule. Otherwise, you may lengthen your loan term and tack on more interest.
- Refinance with a New Car Loan – After one or two years of prompt in-full payments, you might be a good candidate for refinancing. If you can secure a lower interest rate, this will lower your monthly payment to help pay off your loan early.
Explore Your Financial Options at Hendrick Buick GMC Cary
Is it good to pay off a car loan early in Holly Springs? The finance experts at Hendrick Buick GMC Cary can help you weigh your options, so don’t hesitate to reach out to us. Contact us with your questions or visit our dealership in Cary to find out more!
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