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Should I pay off my car loan early?
Is it a bad idea to pay off a loan before the due date? I want to use my tax return to pay off my car loan but I’m not sure if it’s a good idea to pay it off early or not. Should I pay off my car loan early?
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Although it can save you money, it’s not always a good idea to pay off your car loan early. This is because some loans have
prepayment penalties
, or fees that you have to pay if you pay off your loan before the due date. These fees may add up to more than the remaining interest to pay on your loan.If your loan doesn’t have prepayment penalties in the contract, however, paying off a loan early can save you money if the loan has simple interest! Simple interest is calculated each month based on how much you owe, so if you pay off your loan early you’ll be able to skip some interest payments.
If you’re looking for more ways to save on monthly expenses, check out the
Jerry
app. Jerry can help you find the best rates on the car insurance coverage that you need. Sign up is easy—answer some quick questions on the app to learn more.Hope that helps!
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- Gregory R.
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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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