So, you’re a little way into paying off your auto loan and you want to settle it early. What do you do?
How do you go about it? Can you even repay an auto loan before the time is up?
Our Cayuga auto loan team explains everything you need to know.
Let’s start with the most important question first.
Can you settle an auto loan early?
It depends on the loan. Some mainstream auto loans will have an initial period where you would incur an early repayment penalty and then after a year or so, that penalty goes away. Some auto loans don’t have any repayment penalties.
You will have to check your current auto loan terms to see if you’re liable for an early repayment penalty and whether you can overpay or settle early. It will be in the small print somewhere.
How do you pay off an auto loan early?
First, you’ll need to figure out how you’re planning to do it. Then set up the mechanism you’re going to use and then tell the lender.
You have a couple of options for early repayment:
Increase your monthly payment – You can increase your standard monthly payment by a fixed amount each month over the default. Just make sure to tell the lender you’re overpaying the principal, that’s the amount you borrowed, and not the interest.
For example, you pay $250 a month now. Increase that to $500 and you’ll pay off the loan in half the time and drastically reduce the interest you’ll pay over the term.
Make lump sum payments – Come into a little money? Use some of it to settle your Cayuga auto loan. Lump sum payments will usually be counted in the hundreds or thousands. Most lenders won’t work with smaller amounts.
Contact the lender, tell them what you want to do, tell them how much and they will tell you how.
Early auto loan settlement – If you have enough money to settle the entire auto loan early, you can. Get a settlement figure from the lender and make a single payment of everything that’s owed.
Simple, easy and gets the job done.
Once you know how you would like to proceed, you can work with the lender. Call them and explain what you want to do and they will take it from there. If you’re increasing your monthly payment, they will increase the automatic payment by the set amount.
If you’re making a lump sum payment, they can tell you how to make it. If you’re settling early, they will give you a settlement figure and tell you how you can pay it.
It’s very straightforward to settle a Cayuga auto loan early. It just takes a little planning and preparation and you’re good to go!
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!