Beaumont drivers who finance a new or used car with an auto loan are required to make a set payment amount every month. If you are interested in how to pay off a car loan early, one option is making a larger payment than the set number. There are other methods that are viable options for many Buna individuals. The finance team at Nissan of Silsbee covers the methods of paying off a car loan early and whether it is good to pay off a car loan early given your circumstances. Learn more below. 

Is it Good to Pay Off a Car Loan Early?

The first thing you need to consider when planning for the financial burden of not only a car loan, but paying off a car loan early, is the diligence required. Benefits of paying off your car loan early include lower interest paid overall, decreased chances of becoming upside down on your loan, a lower debt-to-income ratio, and you'll be one step closer to financial freedom. 

Is it Good to Pay Off a Car Loan Early: The Right Time

• If you want to free up money for other expenses, and you have little or no debts to take care of
• You have enough extra funds saved up and a larger monthly car payments won't affect your emergency funds and other finances
• You want to lower your monthly expenses to plan for financial goals, such as retirement or growing your family
• You're interested in improving your debt-to-income ratio

Is it Good to Pay Off a Car Loan Early: The Wrong Time

• You don't have savings for emergencies
• You have an excellent interest rate, in which case, it may be smarter to just continue making on-time payments in the agreed upon monthly amount
• If the money you'd use to pay your loan off early could be better served if you set it aside in a retirement fund or for a future financial goal, such as a mortgage 
• You're using your on-time, set monthly payments to build your credit history or raise your credit score
• If your car loan agreement includes prepayment penalties, in which case, you would of course want to avoid those penalties by adhering to your regularly scheduled payment amount 

How to Pay Off a Car Loan Early

There are a few different ways you can start the process of paying off a car loan early. Take a look to determine which route makes the most sense for yourself:

• Bi-Weekly Payments - You'll need to confirm with your lender if it's okay to use this technique. If so, divide your monthly car payment by two, then make that payment amount every two weeks. Using this method, you will be making 13 full payments per year rather than 12.
• Round Up Your Payment Each Month - Each time you make a monthly payment, round up the amount to the nearest $50.
• Make One Extra Payment Each Year in One Lump Sum - If you'd rather not round up for each monthly payment using the above method, you can instead choose to make one large extra payment per year to achieve the same interest savings. 
• Resist the Temptation of Skipping a Payment - Believe it or not, some lenders allow you to skip one or even two car loan payments per year. This may be tempting if you're in the midst of a rough month financially, but it will only lengthen your loan term and tack on more interest.
• Refinance with a New Car Loan - Once you've made one or two years' worth of on-time, in-full payments, you might be a good candidate for refinancing. Of course, you should only refinance if it's securing you a lower interest rate. The lower interest rate will lower your monthly payment, making it easier to pay more than what's required each month, so you can pay off your loan early.

Learn More About How to Pay Off a Car Loan Early with Nissan of Silsbee!

If it's a good time for you to pay off a car loan early, our team at Nissan of Silsbee would be happy to help you with the process. Many Buna and Evadale drivers are interested in doing this, and if you'd like more information on how paying off your car loan earlier than planned can save you money, contact us at Nissan of Silsbee. We're always happy to provide car buying tips you can trust!