Can I pay off a car loan early, or do I have to make monthly payments for the next 5 years?
I am paying off a 5-year car loan with monthly payments of $400. Can I pay off the loan early or do I have to pay this monthly amount for the next 5 years?
Every time of automobile loan that I'm aware of allows for prepayments. Review your loan documents and it should be clearly stated.
Retiring debt early is a great way to free up cash flow and build wealth! If you can pay extra each month toward your outstanding balance, I hope you'll take advantage of it.
Best of luck!
Congratulations on thinking about prepaying your car loan. Most loans can be pre-paid and without penalty. However, you should check with your lending firm if there are fees or penalties. On a separate note, it is advisable to look at the opportunity cost while making any such decision- ie how much money in interest will you save as compared to what you would otherwise do with it (Possibly invest to earn a higher return for example) You probably have done that already.
You should check with the lender to review the terms of your original loan. Typically, auto loans have no prepayment penalty. If this is the case, you can call the lender to get a payoff figure to pay the remaining principal on the loan. You'll only pay the principal and the interest that accrues up through the date the lender receives your check to pay the balance. So, no, you won't need to make any more payments for the remainder of the original term.
Now, if you have financed with a really low interest rate like 0% financing, you'd probably be better off continuing to pay the loan as it doesn't really cost you anything in this case. And it allows you the flexibility of preserving the cash bucket you've accumulated as a reserve for emergencies.