Pay off your auto loan early and reap the benefits. Doing so is a wise move considering the present state of the economy. One of the main advantages of repaying your car loan ahead of time is that you get huge savings on the monthly interest. If you are on a tight budget, paying off your car loan early is a great way to improve your monthly cash flow. And when it comes to your credit score, making early repayments can significantly improve your standing—this will be beneficial for you in the future.
However, paying off your auto loan ahead of time is not always advantageous. Depending on your financial situation and if you have enough extra money on hand to pay the loan off. Some lenders include a prepayment penalty that may work against your desire to repay your car loan early. Weigh your options carefully so that you won’t end up losing money in the end when you pay off your car loan ahead of time.
Once you have decided that paying off your car loan early is for you, follow these six tips to pay off your car loan.
1. Collect all details regarding your car loan, which can be found at your monthly loan statement.
2. One important tip to pay off your car loan is to create a loan amortization table in the spreadsheet program of your computer. Enter your latest loan information. This will give you an idea on the additional amount that you can pay off every month so that you can end your monthly loan payment sooner.
3. Write a check for the extra payment per month, separate from your normal car loan payment. Indicate “Principal Only” on the check so that the lender will not include it to your loan statement next month. In doing so, you will be able to repay your car loan early and pay lower interest throughout the loan period.
4. You have three ways to make an early repayment of your car loan. First, you can raise the amount of money you pay per month for your car loan. Second, you can make extra car loan payments every month. Third, contact the lender, ask for a pay-off amount and you can pay a lump sum of cash.
5. Another early repayment option you have is to pay your auto loan one monthly payment in advance. If you do this, you need not worry about your loan due date again.
6. Contact your lender to inform them about your repayment decision. Tell them that you plan to pay off your car loan once every two weeks or one month in advance and that you prefer that the payment be considered a regular one, not an additional payment. If the lender allows you to pay ahead of time, you will never be late in your repayments.
These tips to pay off your car loan can help you completely repay your loan on time and at your own convenience.