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What is the best way for me to pay off a car loan?
Is there a best method for paying off car loans? I just came into a little extra money, and I finally have enough to pay off my car loan. I can't decide if I should do it all at once or in monthly installments.
Shannon Martin · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Congrats on the sudden windfall! There are a few ways to pay your car off early, but your best option will depend on your loan contract.
Some
car loans
have early payoff penalties to dissuade customers from paying off the loan ahead of time. This is a way for banks to recoup some of the interest they’ll lose when you stop paying them each month. But feel free to pay off the remaining balance if you don’t have a penalty in your contract.When the credit companies report the car loan paid off, you’ll see a slight dip in your credit. But try not to worry—it’s temporary.
If you are working to
rebuild your credit
, refinancing your car is a better plan than paying it off all at once. When you refinance, you’ll get lower interest payments with better terms. The monthly installments will give you an opportunity to pay consistently, which would reflect well on your credit score.For help refinancing your loan, download the
Jerry
app. A licensed broker, Jerry is a great resource for comparing loan options from multiple lenders. Our refinance calculator makes it easy for you to find the best lenders at the best rates.MORE: How to refinance a car
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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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