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.

Answer
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.
Eric Schad
Answered on Oct 21, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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