If your financial situation has changed since you first obtained a car loan, it could be beneficial for you to make additional payments to faster settle this loan. Whether you have earned a bigger salary at work or now receive annual bonuses, having extra cash on hand is perfect to assist you in paying off your car loan sooner. As one of the best Used Car Dealer in Toronto, our team at Good Fellow’s Auto Wholesaler is here to help you explore what it means to pay off a car loan faster. Join us as we review what it means, the benefits, and the considerations to first evaluate.
How Making Extra Payments on Your Car Loan Works
If you wish to pay off your car loan faster, it’s important to understand how this process works before sending your money. To have your car loan paid off faster, it’s crucial to ensure your money is being put toward the principal amount and not the interest owed. When money is put towards the principal, it will reduce the total amount you owe and your total interest. Some lenders may allocate extra payment differently so it is important to ensure your money is being put where you want it to go. If are interested in refinancing a car loan to get a better interest rate, it’s best to speak with a financial expert from Good Fellow’s Auto Wholesaler.
Benefits of Paying More on Your Car Loan
Choosing to pay more on your car payment each month has significant benefits. Paying off your loan faster means you have the potential to save money and gain greater financial flexibility. Together, let’s explore the top benefits of paying your car loan early.
- Reduced Interest Expenses. Whether your auto loan is for 60, 72, or 80 months, the accumulated interest owing can be substantial. For this reason, by making additional payments, you can effectively reduce the total interest paid over the loan term.
- Accelerated Loan Repayment. Paying more towards your auto loan each month enables you to reach the end of your loan term sooner. This means you can free up funds for other purchases or debts.
- Lower Debt-to-Income Ratio. Having a lower Debt-to-Income (DTI) ratio is beneficial as it helps one to be able to qualify easily for another form of credit. For example, this could be a mortgage.
What to Consider Before Making Extra Payments
Before deciding to pay more on your auto loan, let’s examine a few things that one should first consider. It’s best to first confirm whether or not your lender permits extra payments or if penalties apply. Further, if you have other higher-interest debt, your money might be better used elsewhere. Allocating your money towards the highest debt may be a better option. Lastly, consider your budget and make sure you won’t put yourself in financial strain by paying more monthly car payments.
How Our Used Car Dealership Can Help
In conclusion, if you have extra cash on hand, it may be time to consider paying your car loan off sooner than planned. If you can do this, you can enjoy the opportunity for future financial endeavours! Whether you are looking to pay off your loan sooner or obtain a Bad Credit Auto Loan, our dealership at Good Fellow’s Auto Wholesaler would be happy to support you. Contact our team at 1 (855) 581-9590 today.