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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 mission is to help you make better financial choices by providing you with interactive tools and financial calculators as well as publishing accurate and original content, by enabling you to conduct your own research and compare information at no cost - so that you can make financial decisions with confidence. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website come from companies that pay us. This compensation may impact how and when products are featured on this site, including such things as the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law. Our mortgage home equity, mortgage and other products for home loans. This compensation, however, does have no impact on the content we publish or the reviews that you see on this site. We do not cover the vast array of companies or financial deals that may be open to you.



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

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







The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to manage their finances by providing concise, well-researched, and clear facts that break down otherwise complex topics into manageable bites.









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As long as that your lender doesn't have a penalty for prepayment, paying off your faster is an excellent way to save money. It means less interest paid -- and , when you're done, you'll have an extra few hundred dollars in your budget each month. But getting there can be challenging. There are some strategies you can utilize to pay off your loan off more quickly. But, even if you can do it, it may cause you to be in a more dire financial situation if you're not aware of your strategy. 6 strategies to pay off your car loan faster There is no one path to paying off your car loan ahead of time. It makes sense to vary your approach. Once you've got an idea of how, you could take advantage of a few ways to make payments on your vehicle loan more quickly. 1. Refinancing your loan with a different lender can be an easy method of paying off your loan more quickly. If you choose a shorter loan term, you may have the option of keeping the same monthly payment -- provided you score lower interest rates. Even if you don't make additional payments or round up your payments in the first place, you'll finish the car loan quicker. 2. Make biweekly payments Although it may seem like a lot, paying twice a month instead of just one time will help you get to the finish line faster. It also helps to save money on . It's because interest will take less time to accumulate before you can make payments -- and because you'll always lower your total loan balance. It helps move you toward the date of your early payment without significantly increasing the amount you put toward your loan every month. 3. Round your payments up to the nearest 100. Similar to this in rounding up your monthly payments, it will result in a minor change from month to month, but will have a significant impact overall. By rounding up to the nearest 100, or at the very least, the closest to the entire number, you'll slowly lower the principal amount of your car loan. Additionally, you'll be ahead of your schedule that will help keep you ahead of interest rates and allow you to make a smooth transition into a faster payment. 4. Opt out of unnecessary add-ons if you would like gap insurance as well as an extended warranty or a service contract for your loan Contact your lender and request that they cancel the add-ons. You will be able to receive a prorated reimbursement for the remainder while also lowering your monthly payments. Instead of putting the cash back into your bank account, apply it to your loan. So, you'll owe less overall and benefit from the benefit of a lump-sum payment. 5. You can make a significant additional payment Tax returns, bonuses , and other large lumps of cash could be used to pay for your auto loan. If you can cut the principal amount by a couple hundred dollars, it's likely worth doing. Like rounding your payments and making payments biweekly to avoid interest from accumulating. As your loan amount decreases the more of your payments goes towards the principal amount, which will result in an early payoff. 6. Make sure you pay each month, even when you're ahead of schedule and you are ahead of schedule, you must still pay your loan every month. This will stop interest from accruing which means that more goes toward principal and thereby reducing the amount of cost of interest. In addition, making regular payments even in the absence of a need can result in paying on your vehicle loan early. When not to make a payment on your car loan in time. Making the decision to pay off your vehicle loan early means an extra couple hundred dollars in your account each month. In some instances it could harm your finances more than help and so not be the ideal decision. Avoid paying your loan off in a hurry when there is a prepayment penalty. A essentially punishes you for not making enough payments or fully paying off your loan in advance. It is the lender's attempt to make up with the amount of interest that you could have paid if you had stayed on schedule. If there's a prior payment penalty, make sure it doesn't cost more than what you'd normally be paying in interest. The loan is based on precalculated interest . front-loads the interest you pay each year to ensure that the first month accounts for a larger portion than the last month. If you are able to take care to pay off your loan early, you won't substantially reduce price of the auto loan. In this scenario it's best to adhere to the loan timetable. If you don't have a lot of debt. While it may sound counterintuitive but your credit score is calculated on the kind of debt you have and the duration of the debts. Because auto loans are long-term loans paying on a regular basis for years can help keep your credit score high. One caveat: paying off your loan can reduce the credit utilization ratio, which accounts for around 30 percent of your credit score. If you are in debt with other creditors and have a high debt-to-income ratio (DTI), then removing one debt will help boost your score. Ways to lower your monthly car payment Aside refinancing your loan There are two options to reduce your monthly payment either defer them or ask for an loan modification. Deferment allows you to skip the payment if you're having financial issues that are short-term. Loan providers may give you up to three months of deferment in order to help you get through the. But deferment only moves the installments to the finalization of your loan which means that you'll be required to pay them back in the future. Also, you'll be accountable for interest costs, which means that at the end it's more costly. Lenders may be less willing to alter your loan however it wouldn't hurt to ask. Similar to refinancing, it can change the conditions of your loan by either extending your time period or decreasing your interest rate. If you are able to negotiate a modification to your loan, you could reduce your monthly payments without needing to sign a new loan with another lender. What next? It might not always be the most beneficial option to make the payment on your vehicle loan in advance. If you're facing penalties for prepayment or a potential hit to your credit score it aren't worth it. If you're looking to pay off your financial burden, reducing your car payment is among the most efficient methods to free up your budget. Refinancing -- or just making extra payments -- is the most effective way to repay your car loan faster. Even if it's only one extra dollar a month, you'll be able to lower your debt, and possibly take a few months off from your loan. Find out more


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Written by a Personal and Business finance Contributor

Kellye Guinan is a freelance editor and writer who has more than five years of experience in personal finances. She's also a full-time employee at the library in her town in which she helps the community access information about financial literacy, in addition to other topics.



The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to control their finances by providing concise, well-researched, and well-studied data that breaks complicated topics into bite-sized pieces.






Auto loans editor




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