Is it possible to pay off a car loan before maturity?

I want to get rid of my car loan because I'm planning on buying a house in the near future. Can I pay the car loan off before maturity?

Answer
Yes, you can absolutely pay off your car loan before it reaches maturity! In many ways, it’s a smart move that can free up some extra cash and cut your debt.
Just be aware of what paying off a car loan does to your credit score. When you finally pay off your loan, you change your total amount of credit and your credit mix, or your blend of installment loans and revolving credit.
Although you paid off the loan, the lack of extra debt and installment loans can lower your credit score temporarily. But don’t worry too much. The hit will be mild.
Make sure you don’t have any prepayment penalties in play, either, as these can cost you an extra charge of 2-4% of the value of the loan.
If you’re planning on buying a house, you might even wait until after you close on the mortgage to pay off your car loan. By doing so, you’re ensuring you have enough for a home down payment, as well as keeping your credit score just a few points higher.
After you pay off your car loan, take a look at your car insurance policy. Because you’re not under a car loan, you can keep your current full-coverage plan or lower it to liability-only, depending on your needs. Use Jerry to compare rates from top insurers to find the best rates for your desired coverage level.
Eric Schad
Answered on Nov 16, 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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