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How to pay off a car loan faster Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering you interactive financial calculators and tools, publishing original and objective content. We also allow users to conduct research and compare data for free and help you make informed financial decisions. Bankrate has agreements with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site are from companies that pay us. This compensation may impact how and when products are featured on this website, for example for instance, the order in which they may appear within the listing categories in the event that they are not permitted by law. This applies to our mortgage or home equity products, as well as other products that lend money to homeowners. This compensation, however, does affect the information we publish, or the reviews that you read on this site. We do not cover the universe of companies or financial deals that may be open to you.



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Jordan Siemens/Getty Images
4 min read Published 17 August 2022
Authored by Kellye Guinan. Written by Personal and Business Finance contributor

Kellye Guinan is a freelance editor and writer with more than five years of experience in personal finances. She's also a full-time librarian at the local library where she helps her community access information about financial literacy, among other topics.







Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to control their finances through providing precise, well-researched and well-written data that break otherwise complicated topics into bite-sized pieces.









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As long as that your lender does not have a penalty for prepayment, paying off your faster is a fantastic method to save. It means less interest paid -- and when you're finished, you'll have a few extra hundred dollars left in your budget every month. However, getting there is challenging. There are a few tactics that you can employ to pay your loan off quicker. Even the best option do it, it may make you in a much worse financial situation if you're not aware of your strategy. 6 strategies to pay off your car loan faster There's no one path to paying off your car loan prior to the timetable. It makes sense to vary your approach. When you've got an idea of , you are able to take advantage of a few strategies to get rid of your vehicle loan faster. 1. Refinance with a new lender is a great option to pay off your loan more quickly. If you choose the shorter loan duration, you might be able to keep the same monthly installment -- provided you score a lower interest rate. If you don't pay extra or round your payments up, you will naturally finish your car loan more quickly. 2. Make biweekly payments Although it may seem small however, making payments twice a month instead of just one will get you closer to the finish line. It also helps reduce the cost of . The reason is that interest will take less time to accumulate before you can make an installment -- and because you'll always lower the total loan balance. This helps you move towards the date of your early payment without significantly increasing the amount you contribute to your loan every month. 3. Make your payments round to the nearest 100. Similar to this, rounding up your payments can have a slight impact from month to month, but will have a significant impact overall. By rounding to the nearest hundred, or at the very least, the closest whole number, you will slowly reduce the principal of your car loan. You will also get ahead of your schedule that will help keep you ahead of the interest rate and make it easier to get a quicker payoff. 4. Avoid unnecessary add-ons If you like gap insurance as well as an extended warranty or a service agreement to your loan, contact your provider and request that they cancel them. You should receive a prorated refund for the remainder , and also reduce your monthly payment. But rather than putting that money in your account, apply it to the loan. So, you'll owe less overall and will benefit from the benefit of a lump-sum payment. 5. Make a large additional payment Bonuses, tax returns and other big lumps of money can go to your car loan. Anytime you can lower the amount of your principal by a couple of thousand dollars is likely worth it. As with rounding your payments, and making biweekly payments, it will prevent interest from adding up. As your loan balance decreases, more of your payment will go toward the principal amount, which will result in an early payoff. 6. Pay each month Even when you're ahead of schedule and you are ahead of schedule, you must still pay your loan each month. This will stop interest from rising which means that more of your principal is paid which will reduce the interest you pay. In addition, making regular payments even that aren't needed can result in paying off your car loan early. When not to make a payment on your car loan early The ability to pay off your car loan early can mean a couple hundred dollars in your bank every month. However, in certain situations you may negatively impact your financial position more than you help and so not be the ideal decision. Avoid paying your loan off early If there is a prepayment penalty. The penalty is basically a way to punish you for not paying your loan in full or fully paying off your loan in advance. It's the lender's effort to make up any interest charges you might have incurred if you had stayed on schedule. If there's a prepayment penalty, make sure it's not more than you'd pay in interest. Your loan is based on precalculated interest . It is a way to front load the interest you have to pay each year so that the first month is accounted for a larger portion than the final month. When you take care to pay off your loan early, you won't significantly lower costs of your car loan. In this case it's best to adhere to the loan timetable. You don't have much debt. While it may sound counterintuitive but your credit score is calculated on the kind of debt you've got and the duration the accounts. Since automobile loans are long-term loans paying on a regular basis for many years will to keep your credit score up. However, the process of paying off your loan can reduce your credit utilization ratio, which is about thirty percent of credit scoring. If you have other debts and an excessive debt-to-income ratio (DTI), then removing one of them will improve your score. Strategies to reduce the cost of your car loan from refinancing your loan, there are two methods to cut down the cost of your monthly installments either defer them or ask for a loan modification. Deferment allows you to skip payments if you're facing financial difficulties in the short term. Lenders may offer one to three months deferment to ease your burden. However, deferment is only a way to move installments to the end of your loan which means that you'll be required to make them up eventually. You will also be responsible for interest and at the end it's more costly. Some lenders might not be able to change the terms of the terms of your loan however, it's not going to hurt to ask. Much like refinancing, will change the conditions of your loan by either extending your time period or decreasing your interest rate. If you are able to negotiate an amendment to your loan or loan term, you can reduce your monthly payment without the need to find an entirely new lender. What next? It might not necessarily be the best option to make the payment on your car loan early. If you'd face prepayment penalties or a potential negative impact to your credit score it will not be enough to justify the expense. However, if you're trying to pay off your the burden of car loans, getting rid of them is among the fastest methods of making room in your budget. Refinancing -- or just making additional payments are the best way to repay your car loan more quickly. Even if it's just an extra few dollars per month, you will decrease your debt and cut a few months out of your loan. Find out more


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Written by Business and personal finance Contributor

Kellye Guinan is a freelance editor and writer with more than five years of experience in personal finance. She's also a full-time employee at the library in her town where she helps her community get information about financial literacy, as well as other topics.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to manage their finances with clear, well-researched facts that break down complicated topics into bite-sized pieces.






Auto loans editor




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