Will I pay less interest if I pay off a car loan early?
I'm trying to save money where I can. I'm wondering if it makes sense to pay off my car loan early to save on interest charges.
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Answered on Apr 02, 2021
In theory, yes. You can save a substantial amount of money by paying off your car loan early. However, you may run into problems if your lender has prepayment penalties. To earn some extra money on the sale of a car, many in-house lenders have rules about prepayments that essentially offset the benefit of paying off loans early.
Furthermore, if you have a zero percent interest loan, paying the loan off early doesn’t really provide any benefits other than lowering your amount of debt. As far as interest goes, it won’t make a bit of difference.
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