How can I pay my car loan off early?

Is it possible to pay a car loan off early? I am working on building my credit and would like to save money on all of the interest I am paying.

Answer
Paying off your car can save money and boost your credit. Before you start making extra payments, there are a few things you should look into first.
Some banks have a prepayment penalty fee. Banks make their money from all of the interest customers pay on their loans. The earlier you pay off the loan, the less money they make.
Contact your bank and ask if they have a prepayment penalty and find out if they allow principal-only payments.
Some banks will require you to make a separate principal-only payment. Other banks will take anything you pay over the monthly amount due and put it towards the principal for you. This is key to paying the car off early. Do not make extra payments on the balance, make sure they go towards the principal.
Car loans can have the interest front-loaded. This means that most of your payments are put towards the interest and not the amount you have actually borrowed.
Since you will be paying more towards your car, shop around for a cheaper insurance policy to help save money. Give Jerry a try! Jerry is an insurance comparison app that shops for low prices with over 50 different insurance companies. You will get quotes in seconds, and once you buy a policy, the ID card is available right away.
If you can pay your car off a year early, this will save you hundreds of dollars in the long run! Good luck!
Shannon Martin
Answered on Nov 05, 2021
Shannon is an expert in personal lines liability insurance with 13 + years of insurance industry experience. She also served as a special insurance liaison to AARP members for 6 of those years. She is a graduate of UL Lafayette and currently resides in NY with her family. Shannon is also an amateur juggler, ukulele player, and is a time travel paradox theory enthusiast.
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