When it comes to auto loans you have a set amount you pay monthly. Use this auto loan early payoff calculator to see how much you can save by paying off your car loan sooner.
Below, we discuss how you can make a plan right now using a little bit of research and our auto loan early payoff calculator.
From student loans to mortgages to car payments, we rack up a lot of loans within the first few decades of our lives. Yet, they're all life necessities.
How do you fight against a debt that comes from the things you need? One way is by pursuing an early payoff strategy.
By using this calculator you'll find the benefits of paying off your car loan early, as well as how to go about it. It helps you determine the quickest way to pay off your loan while remaining within a practical budget.
With this tool in your arsenal, you don't have to be an accountant to create a custom roadmap to paying off your car loan.
Allowing your debt to linger for years is rarely advantageous.
Unless you have an extremely low-interest rate, you will find yourself paying far more in the long run than you anticipated simply through interest dues.
Let's say you signed a car loan for $10,000. Your loan terms outline an APR of 14.99% which you are scheduled to pay over the course of 5 years.
You may think your payment is reasonable each month. The truth is that you're shelling out an extra $4,271 through the life of the loan, on top of the total money lent.
Yet if you simply added $50 to your monthly payments, you could shave off $1,072 of that thick stack of interest while eliminating your debt sooner.
For most people, it is. The only factor that should stop you from paying off your loan balance early is if it breaks your budget.
But wait... there's more. Before we dive into how to calculate your early payoff strategy, let's cover a few more advantages behind expediting the process of paying your loan in full.
Some of us have been taught that debt is a good thing. In a way, this is true. You have to accrue debt in order to pay it off and elevate your credit score.
Paying off your car loan early opens doors to financial freedom or new buying opportunities. And as you pay off your debts, your credit score should improve.
Another advantage is that you reduce your overall debt-to-income ratio. This is important if you are planning to make another large purchase in the future.
If your debt-to-income ratio is too high, you may not qualify for additional credit or loans.
By paying off your car loan (thereby lowering your debt-to-income ratio), you have better odds of not only getting the credit or loan you need but also getting that loan or credit at a lower interest rate.
When you eliminate your loan payments from your monthly expenses, you often open up a few hundred dollars of your monthly budget to spend as you will.
That money you free up can be used in numerous ways, including:
To figure out the best repayment strategy, you'll want to use a car payoff calculator. The most effective strategy will be tailored to your budget and goals.
Before you get started, make sure you look up the details of your loan. These details should be up-to-date according to your latest payment. This ensures the most accurate breakdown for your payoff schedule, savings, and accelerated monthly payment.
Details you want to make note of:
This information will be inputted into your auto loan early payoff calculator to help you determine how much extra money you should apply to your monthly payments.
Next, you will want to determine your budget.
Evaluate your monthly expenses, then subtract them from your current monthly income. Keep in mind you want to account your non-fixed expenses too, including a budget for entertainment and spending.
The money remaining is your total pool from which you can pull the additional monthly payoff amount.
At this point, you can begin using your auto loan early payoff calculator. You can use ours for free.
Plugin the details of your loan and then choose what kind of report, or breakdown, you would like to see. The options include monthly or annually.
Annually is a great option if you want to see what your overall saving are for the year. Monthly is better when you're evaluating a plan that suits your budget.
Play with the calculator a little by applying a couple of additional monthly car payment options you can afford.
Ultimately, you want to apply the highest amount of extra payment to your existing monthly obligation. This will make sure you pay off your loan quicker and save more on your total interest paid.
Once you complete the questionnaire, you will find a series of reports. These reports include a graph of your balance and interest as well as your current and accelerated payment schedule.
This will give you a better idea of how much you will save through the additional payment plan you've created.
For another early payoff strategy, check out our bi-weekly auto loan payments calculator.