If you have an outstanding car loan and are considering paying it off early, you may be wondering how to calculate your car loan early settlement figure.
Knowing your settlement figure can help you plan your finances and determine if paying off your loan early is the right choice for you.
In this article, we’ll guide you through the steps to calculate your car loan settlement figure and provide you with some tips on how to save money on interest payments. Let’s get started!
What is a Car Loan Settlement Figure?
A car loan settlement figure is the amount it would cost to pay off the loan immediately.
That figure will be made up of the amount you have still to pay off the amount you borrowed. There may be a small interest rebate too as interest is front loaded, but we wouldn’t count on that.
You’ll need a settlement figure to pay an auto loan off early. This will be the total amount you pay to the lender in order to settle the loan.
How to Calculate a Car Loan Settlement Figure
It’s difficult to calculate the exact amount as each lender front loads interest in different ways. Plus, different loan lengths, interest rates and overpayment rates can all change the amounts.
You can perform a basic calculation though.
Take the number of payments you have yet to make on your car loan and multiply that by the monthly amount. Then subtract the interest rate.
It will be a rough estimate and won’t take into account any interest rebate but it should give you an idea.
This car loan settlement calculator also does a pretty good job of estimating how much you would be in for.
The other way to get a car loan settlement figure is to contact your lender. They will be able to tell you the exact figure down to the cent.
That figure will be good until your next loan payment or 28 days, whichever comes first.
If you pay that figure before your next payment, your loan will be settled in full.
Should You Pay Off Your Car Loan Early?
How you handle your finances is up to you but there are a couple of things to consider before settling the loan.
Check your loan doesn’t have early settlement fees. Most car loans we provide don’t have early settlement fees but we know plenty that do.
Check your loan paperwork or ask the representative when you’re getting the settlement figure. The fee will usually be a set number of month’s interest charges but can vary.
There’s no point paying off your loan early if you’re only going to have to pay a fee for the privilege!
Car payments improve your credit score. Paying off your loan early means missing out on that benefit.
If you’re rebuilding credit, this is a consideration you’ll need to make. Balance the benefits of not having the monthly outgoing with the downside of not having that entry on your payment history.
Paying off a loan early may seem like a perfectly good idea on the surface but make sure to check the details before doing it!
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!