How to Pay Off Your Car Loan Faster

Like a turbocharged sports car, our financial priorities are always shifting. It’s not unusual that you may have valued a low monthly payment at the time of your car purchase, but now you want to see those loan payments in the rearview mirror. Maybe you came into some extra cash or simply realized the longer your loan term, the more interest you’ll pay. Fortunately, figuring out how to pay off your car loan faster doesn’t have to be difficult.

So, put on your blinker, and let’s get out of the slow lane as we explore the pros and cons of paying off your car loan early. We’ve got some tips on how to bring your balance down faster, including why your local credit union might be the best place to get the process rolling.

How to pay off a car loan faster

Can I pay off a car loan early? 

It is almost always possible to pay off a car loan early. However, just because you can pay off your car loan early doesn’t necessarily mean it’s the best move for your financial situation.

Before you decide whether it’s a good idea to pay off your car loan early, take a close look at the details of your loan. The factors to consider are similar to refinancing a car loan. Look at: 

You can input these numbers into an auto loan calculator (such as this one) to determine roughly how much you could save by shaving off payments, and then weigh those potential savings against any lender fees or fluctuations in your credit score that could result from the early payment. 

Reasons to Pay Off Faster

Paying off your car loan early might be in your best financial interests if: 

Reasons Not to Pay Off Faster

Early loan payoffs sound enticing, but are they always the best financial decision? Here are some red flags that indicate paying off your car loan early may not be the best choice.

How to Pay Off Your Car Loan Faster

If you determine that it makes good financial sense to pay off your car loan early, you have several options for speeding up the process (without getting a ticket). Here are some of the most popular strategies on how to pay off your car loan faster.

1. Make extra payments

If you go the extra payment route, ensure any additional payments go toward the principal — the original amount of money you borrowed from the lender — rather than the loan interest. By reducing the principal balance, you’ll reduce the amount of interest you pay overall. 

These tactics can help you repay your loan faster:

2. Don't skip payments

You might be tempted to skip a loan payment when cash is tight. Even though many lenders allow this, don’t do it. Skipping payments moves you further away from your goal by lengthening the term of your loan and accruing even more interest.

3. Cancel add-on expenses

Car dealerships typically add extra coverage like warranties, gap insurance, and service contracts to your auto loan. You don’t always need these add-ons, so review them closely and cancel the ones you won’t use.

4. Refinance your loan

If your current auto loan includes high-interest rates or other fees, refinancing could lower your payments and improve your terms. If you’ve been making your payments on time, your credit score may have increased since you took out the loan, which can give you more favorable options than you had at the time you signed your lease.

Just remember not to follow a shortcut that doesn’t take you to your goal. If you want to pay off your car loan faster, avoid a new refinancing agreement that promises lower monthly payments but actually extends the length of your loan. 

In the process, be sure to check the car loan rates at your local credit union. Credit union car loan rates are often at least a couple of percentage points lower, on average, than rates offered by banks. Even a point or two can save you thousands over the life of a loan.

Further Resources on Paying Off Your Car Loan Early

Looking for more information to help you make smart car loan decisions? Check out these resources:

Then, if you’re still wondering how to pay off a car loan faster, or whether you even should, turn to your local credit union for help. Like a diligent passenger who will check your blind spots, credit unions offer personalized service and other benefits you won’t find anywhere else. Pop your address into our Credit Union Locator to find a branch near you. 

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Did you know?

Many credit unions offer lower interest rates than traditional banks or online lenders, with more flexible underwriting that makes it easy to secure affordable car loans. Unlike large for-profit banks that answer to shareholders, credit unions are not-for-profit institutions owned by members, so they exist to help you reach your financial goals. 

Find the right Credit Union for you

There are more than 5000 credit unions to choose from across the U.S.