There is one major benefit to paying off a loan earlier than planned – saving money. The sooner a loan is paid off the more money can be saved in interest charges, and there are plenty of ways to accomplish that goal.
Are There Special Requirements for Early Payoff?
There isn’t anything required for an early loan payoff; however, be aware that your loan contract may include penalties for early payment, so check beforehand. If it doesn’t, then you’ve got several options to choose from when it comes to paying your loan ahead of schedule to save money.
Paying a loan down early can save you thousands in interest charges. Interest is accrued every day based on the amount of principal left on the loan. The quicker the loan gets paid, the more money you save.
What Are My Options?
There are three main options you have for early loan payoff that don’t involve any changes to your loan:
- Split your monthly payment – By dividing your monthly payment in half and making a payment every two weeks, you’ll actually end up paying 13 full payments each year.
- Round up your payments – Upping the amount you pay – even just $20 a month – can help you pay off your loan months earlier than planned and save in interest charges.
- Make extra payments – There’s no hard and fast rule that says you have to stick to a schedule when you pay ahead on your loan. Just pay whatever extra money you can and it'll help reduce your principal.
There’s a fourth option, but it does involve changing your existing auto loan and replacing it with a new one. If you’ve been keeping current on your loan, and your credit has improved enough, you might qualify for refinancing. This can typically only be done after someone has had a current loan for at least 12 months. During refinancing, if your credit allows, you may be able to qualify for a lower interest rate. If you don’t, but you’ve kept your loan in good standing, your current lender may be willing to renegotiate your loan term.
When You Need an Auto Dealer
If you’ve paid off your loan early and are looking for your next vehicle, but your credit still has you worried, let Auto Credit Express help. We work with an extensive network of special finance dealers that have lender available to help people with bad credit, no credit, and even past bankruptcy. It’s free to fill out our no-obligation auto loan request form, so what are you waiting for? Get started today!