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What are the advantages of paying off a car loan early?

I have some extra cash and I was thinking about paying off my car loan. What are the advantages of doing so?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Paying off your
car loan
 early is a great way to save money on interest and add a bit of financial security to your life. Some of the top advantages of paying a car loan off early include:
  • Lowering your debt-to-income ratio
  • Avoiding negative equity, or being
    upside down
     on the loan
  • Saving money on interest
  • Money for other expenses or savings
However, you should weigh this against the disadvantages of paying off the loan early, which may include:
You will ultimately have to make the final decision. Whatever you choose to do, make sure you’re not overpaying on car insurance. Use the number-one-rated car insurance app,
Jerry
, to make sure you’re getting the best deals. Jerry compares personalized rates from more than 50 top insurance companies and delivers the best deals to your phone in minutes for free. The average Jerry driver saves $879 a year on car insurance!
MORE:
What is a prepayment penalty on your car loan?
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