Thinking ofpaying off your car loanearly?
You could save big by paying it off early.
In this guide, youll find the insights you better make the most informed decision.
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If youre looking to boost your income this month, weve got just the thing for you.
Why Pay Off a Car Loan Early?
Generally, the main benefits are saving money on interest and gaining financial freedom.
The best advice for paying off a car loan early: Treat it like a mortgage.
The same concept applies to auto loans.
These strategies forearly payoffare all effective, if done right:
1.
(OK, maybe one bottle.)
Instead, apply it directly to your car loan as a lump sum.
Divide 26 by 2, and you get 13 full months of payments, paid over 12 months.
That means, by the end of the year, you will have essentially made an extra car payment.
Just check your budget first to ensure that kind of payment plan is feasible.
This will wind up knocking a few months off the life of your loan.
Resist the Urge To Skip a Payment
Some lenders may let you skip one or two payments a year.
So kind of them, right?
Unless you fall on very hard times, fight the urge to skip a payment.
You will wind up paying more in the end if you do.
We Dare You to Take Control of Your Debt
Up for a debt challenge?
In 10 days,these 10 practical stepscould help you get back on the right financial track.
So, how do you decide if paying down a car loan early makes sense for your financial goals?
For a large remaining balance, take care before deciding to pay off an auto loan early.
Well, if you have an emergency or other financial obligation pop up, you may need those funds.
This doesnt mean you shouldnt pay off the loan early.
Just ensure you have enough funds set aside for emergencies and your monthly bills.
For example, knock out credit card debt first to reduce the burden of that interest on your budget.
Or build up your emergency funds to prepare for the unexpected and alleviate financial stress.
For there, factor in financial windfalls if youre lucky enough to have one!
As a bonus, be sure to factor in the potential for needing a new vehicle.
It can be up to 2% of the remaining loan balance.
Just 39% have enough to cover such an unexpected expense.
And its not just your familys medical emergencies.
Keeping your car loan open could positively affect your credit score.
The average stock market return is about 10%.
Drowning in Expenses?
Maybe youre scrambling after your car broke down.
Or you got a medical bill you werent expecting.
Or inflation has finally pushed your budget over the edge.
You dont need to go it alone.
When money is tight,these resourcescan help you manage unexpected expenses without stress.
To help you decide, follow this decision-making tree.
Assess Your Financial Situation
Do you have an emergency fund with at least 3 to 6 months of expenses?
Yes:Proceed to the next question.
No:Consider building your emergency savings first before making extra payments on the auto loan.
Do you have high-interest debt outside of your auto loan such as credit card debt or personal loans?
Yes:Pay off high-interest debt before moving on to the auto loan.
No:Proceed to the next step.
Evaluate Loan Terms and Interest Rates
Are there prepayment penalties on your auto loan?
Yes:Calculate the penalty and determine if early repayment is still wise financially.
No:Proceed to Step 3.
Yes:Consider the trade-offs and whether its better to allocate funds to these goals instead.
No:Proceed to Step 4.
Will paying off the auto loan impact your credit score?
Yes:Consider the positive impact on your credit score, especially if it will benefit future credit applications.
No:Proceed to Step 5.
Do you have enough cash flow to make extra payments without creating financial strain?
Yes:Consider paying down the loan early.
