Paying Off a Car Loan Early

If you’ve recently bought a new Toyota or one of our used Toyota models, most likely you financed it with an auto loan. Auto loans are a great way to help you get the car you need for your daily Brook Park drives by making monthly payments. However, what happens if you want to pay more than your monthly payment amount? Is it possible to pay off a car loan early? The answer to both is yes!

Paying off your car loan early is a viable option for many Cleveland drivers. Follow along with Metro Toyota as we discuss the benefits of paying off a car loan early and whether it’s the best option for you. Then we’ll discuss how to pay off a car loan early so you can drive through Parma with peace of mind.

Benefits of Paying Off a Car Loan Early

Paying off a car loan early requires a lot of financial planning and diligence, but the rewards are worth it. Drivers will pay lower interest, have a decreased chance of becoming upside down on their loans, a lower debt-to-income ratio, and they’ll be closer to financial freedom. Read below to see if paying off a car loan early the best option for you.

When Does Paying Off a Car Loan Early Make Sense?

• You currently have few other debts or no other debts to pay for and you want to free up money for other expenses.
• You have enough room in your budget or you have extra funds that making larger car payments won’t affect your current budget.
• You want to lower your monthly expenses for a larger financial goal, such as retirement or if you’re planning on growing your family.
• You want to improve your debt-to-income ratio.

When Isn’t it a Good Idea to Pay Off a Car Loan Early?

• If you have no extra funds set aside for emergency expenses.
• If your interest rate is exceptionally good, it may be a better idea to continue paying off your car loan at its current amount. The money you would use to pay off your car loan could be put into another account for savings or retirement.
• You’re currently using your on-time, monthly payments to build your credit history and credit score.
• Your current loan agreement has a prepayment penalty. Check with your lender to be sure, but if your loan agreement has a penalty for paying off a loan early then you’ll want to keep to your current payment plan.

How You Can Pay Off a Car Loan Early

If you’ve determined that it’s good to pay off a car loan early for your budget, there are a few methods you can follow. Read about each method below to find the right one for you:

• Make Bi-Weekly Payments: Check with your lender to ensure it’s okay to pay your loan this way. After they’ve confirmed with you,divide your monthly car payment by two, then make that payment every two weeks. This method allows you to make 13 full car payments a year rather than 12.

• Round Up Your Monthly Payment: Round up your car payment to the nearest $50 each time you make a payment.

• Make One Extra Payment Each Year: Instead of rounding up to the nearest $50 each payment, you can make one large extra payment each year instead for the same interest savings.

• Refinance Your Car Loan: After you’ve made a year or two years worth of on-time, in-full payments, you may be a good candidate for refinancing. Only refinance if it will secure you a lower interest rate though. The lower interest rate will lower your monthly payment, making it easier to pay more than what’s required each month.

Check Your Financing Options With Metro Toyota

For many Brunswick drivers, it is good to pay off a car loan early to secure financial freedom and set aside savings. If you’re interested in paying off your car loan early then contact our finance team! We’ll help you find the best option for paying off your car loan early and set you up with a budget plan for success even if you need car financing with a bad credit score. Contact us today! We look forward to hearing from you!