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Are there any advantages of paying more toward your car loan?
I've been paying my 84-month car loan for about three years, but I’m getting frustrated with how long it’s taking. That said, I'm not sure if paying off the car loan in a lump sum or increasing my monthly payments is a good idea.
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Since you have about four years left on your
car loan
, there are several advantages to paying off the loan early or paying more each month:- Saving money by reducing your total interest
- Shortening the length of the loan
Paying more toward your car loan now can set you up for a better financial situation in the future. But you shouldn’t pay more toward the loan if that means compromising your overall finances.
For instance, if you invest your extra income and get a return that’s higher than your total interest, you’ll make a profit in the long run, even if you take the entire 84 months to pay off the loan.
Make sure to budget for larger payments before you haphazardly throw money at the loan. Finally, do not pay off a loan early if the lender charges
prepayment penalties
. If you’re looking to free up extra cash, consider finding a cheaper car insurance policy.
Jerry
can help you find a more affordable policy in a matter of minutes.View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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