Can I pay off my car finance early?
23 June 2023
By Joy Pearson
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Car Finance is a popular way for people to purchase a vehicle, especially those who may not have the cash to pay for it outright. However, circumstances change and you may find yourself wanting to pay off your car finance early. The good news is that it is generally possible to do so, and in today's post we are going to talk about how you would go about doing so.
Firstly, it is important to understand that paying off car finance early may result in some financial penalties, such as an early payment fee. However, the amount of the penalty will depend on your individual loan agreement and the lender who financed your agreement. Some lenders may charge a percentage of the remaining loan balance, while others may have a set fee. To find out the specifics of your car finance agreement, it is best to contact your lender directly and ask about any potential penalties for early repayment.
Assuming there is no significant penalty, there are a few ways to pay off your car finance early. One of the most common methods is to make additional payments on top of your regular monthly payments. By doing so, you can reduce the overall amount of interest you pay on the loan and shorten the length of time it takes to pay off the balance.
Another option is to make a lump sum payment. If you receive a large sum of money such as a work bonus or inheritance, you can use that to pay off a significant portion of your car finance balance. This method can help you save money on interest and potentially pay off the loan entirely.
It is important to not that not all lenders will allow early repayment, so it is crucial to check your loan agreement for any restrictions. Additionally, some lenders may require a notice period before you can make an early repayment or may only allow a certain number of early repayments per year.
In summary, paying off car finance early is generally possible, but it is important to check your loan agreement for any penalties or restrictions. Making additional repayments or a lump sum payment are common methods for paying off car finance early, but it is essential to work with your lender to ensure you follow their specific procedures. By doing so, you can potentially save money on interest and enjoy the peace of mind that comes with owning your vehicle outright.