For whatever reason, you’re in a position to settle the debt on your car quickly and easily – doing away with things like repayments and saving yourself the accrued interest.
Can you pay off your car loan early?
Yes, you can - well, in most cases.
Lenders typically hide in the small print of the terms and conditions what information you need to consider which includes any early termination fees.
You will need to request a payout letter from your lender to confirm the latest balance owing on your loan.
Once you have these payout figures, you’re set to make your final payment and say hello to 100 per cent ownership of your car.
How do you find out what the early-exit fees are?
"Contact your lender and find out what the fees are for wrapping up your loan early", is the advice from Head of Marketing at Stratton Finance, Chris Dimopoulos.
“Most lenders will just have a set early termination fee,” Dimopoulos told CarExpert.
“Let's just call it $750. What that means is if you take out a five year loan and pay it out in three years, that $750 is just pro-rata’d."
“That might mean you pay an extra $12, $13 a month and you would just pay that section of the fee as your penalty to pay it off"
It’s worth noting that if your loan is based on a variable rate, you’re less likely to be stung with fees for paying the loan off before its end-of-term.
Fixed rate loans are more likely to come with early exit fees.
Can you pay your commercial car loan off?
"If you’re an ABN holder and you’re trying to exit a commercial loan for a vehicle you’re using for business use, it’s not quite as easy as a standard consumer loan", explains Dimopoulos.
Dimopoulos says there are lenders who will charge a very low termination fee for exiting a commercial car loan early.
It’s best to sign up to a car loan like this up front if you think that might end up being you.
Can you pay off your car loan faster?
Yes. And it’s wise to think about making additional repayments as you’ll end up paying less interest over the life of the loan.
Simply increase your monthly repayment over the minimum required by your lender.
It’s worth noting that you might be getting charged a fixed interest rate meaning making extra principal repayments will make no difference.
It’s best to check the fine print of your loan or get in touch with your lender to see if additional repayments will make a difference.
Most lenders will let you pay out your car loan early with, at worst, an early exit fee.
Contact your lender to find out what the deal is. And enjoy having a car that’s entirely yours, and being debt-free!
Disclaimer: The information on this website is for general purposes only and not a substitute for professional financial advice. CarExpert recommends seeking independent legal, financial, taxation or other advice unique to your individual circumstances.