How to Pay Off a Car Loan Early

Paying off a car loan early will reduce the finance charges. The car owner will need to determine the best way to pay off the car, such as accelerating the payments or refinancing to a lower rate loan. The owner can also apply a lump sum to the loan to pay the car off early.

• Decide the best method to use for paying off your car loan early. If you have money saved that is not earning as much as the interest, you pay on the loan you may want to use the cash to pay off your car. If you choose to pay extra each month on the loan go over your finances to see how much you can afford to pay.


• Find an online financial calculator and type in your current loan balance. Contact the bank that has the loan if you do not know your exact balance. Enter the interest rate and the amount that you intend to pay on the loan each month. The calculator will display the number of months it will take to pay off your balance.


• Refinance your car loan if you can get a lower interest rate. Check online to find the current interest rate for the model year of your car. Contact the bank that has the lower rate and apply for a loan to refinance your car.


• Close on the refinance with the bank. Make the same monthly payment on your loan that you always have so you pay off your car early. Use the online calculator to find out how long it will take to pay the loan.


• Sell your car to pay off the balance. If you are buying a new car you can sell your old one to a private buyer instead of trading it in. Use any excess cash from the sale as a down payment on the new vehicle.