What will happen when you pay off a car loan?

I’m three months away from paying off my car loan in its entirety. While I’m excited about paying off the loan, I feel like I’m missing something. What happens when you fully pay off a car loan?

Answer
Congrats on paying your car loan down! When you pay off your car loan, your:
  • Credit score will drop a few points
  • You won’t have any more car payments
  • You will own the car outright
The reason that your credit score drops is that the payoff actually closes the account. When you close an account, your credit score drops as a result. However, you won’t have any more monthly payments and you own the car outright.
Other things that should happen when you pay off a car loan include:
  • Getting the title back or a lienholder release that allows you to retitle the car without the lender’s name on it.
  • Telling your car insurance company that you no longer have a lienholder so any settlements come directly to you.
  • Reassessing your finances and car insurance needs.
While you can maintain full coverage car insurance on your vehicle, this may be an unnecessary expense. Truly assess your needs and ability to pay out of pocket to decide whether you want to switch to liability coverage or keep full coverage. Whatever you decide, download the Jerry app to get the best rate for your car insurance coverage.
As a licensed broker, Jerry helps you find and compare quotes from over 50 top providers in minutes. When you find a better rate, Jerry can help you buy your new coverage and even cancel your old policy!
Eric Schad
Answered on Dec 09, 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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