Posted on: Oct. 19, 2015 in Car Loans

While getting a car loan can help you buy a car faster than you’d be able to on your own, you’ll want to pay off that loan as quickly as possible to avoid wasting money over time on interest. Not only will quickly paying off the car loan benefit you financially, it can also help to improve your credit score as well. In the process of paying off your car loan early, you can also learn some practices that can be applied to other areas of your finances as well.


Find out If You’ll Be Penalized for Paying Your Car Loan Early

Believe it or not, but some lenders don’t want you paying off your car loan early because you’ll be costing them in interest by doing so. Check the terms of your loan to see if you can make more than one payment a month or larger monthly payments without incurring any penalties. Better yet, talk personally with the loan agent to see if you can pay the loan off early since you might not be able to make heads or tails of some of the language used in the loan paperwork.

Research Loan Payoff Recommendations

Some financial institutions offer free recommendations to help you pay off your loan. If your lender does penalize you for paying off your loan early, there may be a strategy available that will still allow you to pay off the loan the way that you want. Ask your lender if they’d be willing to decrease the balance of the loan if you pay off the rest of it in one lump payment.

Something else you can do is make additional payments to the loan’s principle base only. Some lenders will only charge you a fixed monthly interest and let you make additional monthly payments to the loan’s principle amount. If your lender agrees to this practice, you can make additional small payments and not have to pay as much interest.

Make a Budget

One way that you can make extra payments to your loan is by making a budget and cutting unnecessary expenses. The extra money that you have left over can go towards your car loan. Unnecessary expenses might include internet, cable, eating out and having a landline telephone. While having a budget will take some getting used to, you’ll be surprised to see where your money once went and how much you can save every month.

Paying off a loan or a credit card early is one of the best feelings in the world. Not only do you no longer have to worry about those monthly payments, you still get to enjoy your car.

If you need auto financing but your credit is keeping you from getting approved, CreditYes can help! We can match you with a dealership in your area that will be with you every step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!