Car loan repayment calculator – Forbes Advisor
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If you want to save money on your car loan or pay it off sooner, adjusting the amount you pay per month can help. This auto loan repayment calculator can show you these potential savings and highlights how long it will take to pay off your auto loan in each scenario.
How to use this car loan repayment calculator
To use the calculator, make sure you have the following information:
- Vehicle purchase price: This is the amount you financed to purchase your vehicle.
- Term of the loan: The length of time (in months) that you agreed to repay the amount you borrowed. For example, 60 months is a common auto loan term.
- Annual percentage rate (APR): This is the auto loan interest rate you agreed to pay, expressed as an annualized percentage, including any applicable lender fees.
- Months remaining: The number of months you have left on your loan.
- Increased monthly payment: The amount you want to increase for your monthly car payment (if any).
- Current monthly payment: This is the amount you are currently paying for your loan each month.
- Loan term shortened by: The number of months in your loan would be reduced if you increased your payment amount.
- Total interest savings: The amount you will save in interest if you make the additional payments suggested by the calculator.
Benefits of prepaying your car loan
Paying off your auto loan earlier than expected has some notable benefits:
- You will have more money in your budget each month.
- You will pay less interest over the life of the loan.
- You will be the free and quit owner of your vehicle, so you can resell it if necessary and/or more easily buy a new vehicle if that is your goal.
Risks related to the prepayment of your car loan
There are also some risks to keep in mind when deciding whether or not to prepay your car loan:
- Your lender may impose a prepayment penalty, so check with them before deciding to pay off the loan too early so you don’t owe more than expected.
- Your credit score might drop temporarily when the loan is closed, which happens automatically when the loan is paid off. So if you’re planning on taking out another loan soon, like a mortgage, you might want to put off paying off the car loan until you’ve secured the new loan.
- You might have other debts with a higher interest rate that you should focus on paying off first.
Related: How to get a car loan with bad credit
Tips to pay off your car loan faster
There are different strategies to pay off your car loan faster. Here are a few things to consider:
- Pay more than the minimum. One of the easiest ways to pay off your car loan sooner is to pay more money each month. For example, you can simply round up your payments to the nearest dollar to reduce the balance or make an extra payment from time to time.
- Put any bonus cash towards the loan. Another option is to make a lump sum payment for your car loan. Maybe you got a big tax refund or received a bonus at work.
- Refinance at a lower interest rate. If you can get a lower interest rate than your original loan, refinancing your car loan could help you pay it off faster.
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Related: Best auto loan rates
Frequently Asked Questions (FAQ)
How quickly can I repay my car loan?
As long as your lender doesn’t have any restrictions (like imposing a prepayment penalty), you can pay off your car loan anytime you want without penalty. Just be sure to consider your current budget and your cash flow needs in the near future.
Should I refinance my car loan instead?
Auto Loan Refinance can also be a good idea and might even make more sense than trying to pay off the entire loan faster. For example, if the the car loan is relatively new and you haven’t made many payments yet, refinancing may be a better idea than trying to pay more over the remainder of the loan term.
Another consideration is your credit. If your credit score has improved since you took out the loan, you might be better off refinancing to save money since you’ll likely qualify for a lower interest rate.
You can also consider refinancing if you need help making your monthly payments. If you refinance, you will have the option of extending the term of the loan, which can lower your monthly payments. Just keep in mind that going this route will cost you more in interest over the life of the loan.
Related: Best Auto Loan Refinance Lenders
Are there penalties if I repay my car loan more quickly?
Some lenders charge a prepayment penalty, but not all. This means that if you pay off your car loan before a certain date, you may be charged additional fees. Always check your loan agreement or contact your lender if you are unsure.