Can I Pay Off My Car Loan Early?

If you’re feeling the weight of too many monthly payments, you might be thinking that paying off your car loan early might be a good way to alleviate the situation. But is it good to pay off a car loan early? Our finance department has helped a lot of Tenafly customers make sense of auto financing. So, let’s talk about how to pay off a car loan early.

Can Paying Off a Car Loan Early Improve My Credit?

Is it good to pay off a car loan early if you want to improve your credit score? That depends on your debt-to-income ratio. If your debt-to-income ratio is too high or if you’ve utilized close to 100% of your available credit, then, yes, paying off your car loan early might be a good move otherwise, you can help your credit score just as much by just paying your bills on time.

Paying off a car loan early might be right for you if…

• You would like to free up money for other expenses.
• Making larger monthly car payments won’t affect your emergency funds and other finances.
• You would like to lower your monthly expenses to plan for a larger financial goal, such as entering retirement or growing your family.
• You need to improve your debt-to-income ratio.

Is It Good to Pay Off My Car Loan Early if I Don’t Have Much of a Credit History?

What if you’re trying to build your credit history? Then continuing to make payments on your loan in a timely manner may be more helpful. There are actually a number of reasons why paying off a car loan early might not be a good idea. Here are some reasons some Cresskill drivers have decided paying off a car loan early wasn’t right for them:

Paying off a car loan early may NOT be a good idea if:

• You can’t afford to make extra or higher car payments.
• You have a low interest rate and the money you’d use to pay off your loan early could be better used to create a retirement fund or for a future financial goal.
• You need to build your credit history.
• Your loan agreement includes a large prepayment penalty.

How to Pay Off a Car Loan Early

So is an early loan payoff right for you? Then you’ll want to go about it the right way. You can use one of the methods below.

How to Pay Off a Car Loan Early

• Pay the entire loan in one lump sum.
• Pay off as big a portion of the loan as you can, then pay off the rest with continued monthly payments.
• Make extra payments when you can afford it.
• Make larger monthly payments and ask that the excess go towards the principal of the loan.

Let the Finance Department at BMW of Tenafly Help

If you’re considering paying your loan off early, or you’re wondering what your options are, talk to the finance department at BMW of Tenafly. We’ll be glad to help. We make auto financing so easy that you can even apply for financing online from the comfort of your Fort Lee. And, while you’re here, check out our other car buying tips. We’re just down the road from Closter. So, drop by or contact us today!