Paying Off Car Loan Early with Serra Mazda

North Canton drivers purchasing a vehicle with Serra Mazda will have an auto loan with a monthly payment amount that they need to pay in order to fully pay their vehicle off in accordance with the loan. However, you may be wondering if it is possible to pay your car loan off early. Is it good to pay off a car loan early? Learn more with Serra Mazda. Below, the finance team at Serra Mazda addresses a few things when it comes to paying your car loan off early:

• Is it good to pay off a car loan early?
• How to pay off a car loan early

Is it Good to Pay Off a Car Loan Early?

It requires a lot of diligence and planning to pay off your car loan early, but the benefits are worthwhile for many Canton drivers. Your interest payments will be lower overall, and you will lower your chance of going upside down on your loan. Paying your car loan off early also will lower your debt-to-income ratio, and increase your financial freedom.

When To Pay Off a Car Loan Early

• If you don’t have any other debts, paying your car loan off early could free up your money for expenses.
• With extra funds saved up or some wiggle room in your budget, making larger monthly car payments shouldn’t affect your emergency funds and other finances
• If you want to lower your monthly expenses to plan for a larger financial goal, like buying a house or growing your family
• You want to improve your debt-to-income ratio

When NOT to Pay Off a Car Loan Early

• If you don’t have extra funds
• If you have a great interest rate, it may be wise to continue making on-time payments in the agreed upon monthly amount.
• Your building credit history or raising your credit score with your on-time payments.

How to Pay Off a Car Loan Early

There are a variety of ways you can pay off your car loan early. Here are a few options to help you choose the best option for you:

• Making Bi-Weekly Payments — Confirm with your lender to ensure it’s okay; divide your monthly car payment by two, and make that payment amount every two weeks. This method allows you to make 13 full payments per year rather than 12.
• Higher Payments Each Month — Round up the amount to the nearest $50 each time you make a payment.
• Make An Additional Lump Sum Payment Each Year — If you don’t want to round up for each monthly payment, you can choose to make one large extra payment per year to achieve the same interest savings.
• DO NOT Skip a Payment — Some lenders allow you to skip one or two car loan payments per year. It’s tempting, but it will just increase your loan term and interest paid.
• Consider Refinancing — After making one or two years’ worth of on-time, in-full payments, you may be able to refinance your loan. Only do this if you are able to get a better interest rate. This will lower your monthly payment, and make it easier to pay more than what’s required each month so you can pay off your loan early.

Learn More with Serra Mazda!

Now that you know the situations when it’s good or bad to pay off a car loan early, you can hopefully make the best decision for yourself. Hudson and Canton drivers with questions can contact our team at Serra Mazda. We also have a few car buying tips available for those looking to make their next big purchase. Come visit us in Serra Mazda today to see some of our new vehicles.