Is it Good to Pay Off a Car Loan Early?

Thinking about paying off a car loan early? Wondering, “Is it good to pay off a car loan early?” Murrieta drivers should know that there are some conditions under which paying off a car loan early isn’t a good call. The finance center at BMW of Murrieta covers how to pay off a car loan early and how to know whether it’s a good idea, below!

Paying Off a Car Loan Early: Advantages

When you fill out a credit application,you should expect a loan term of about 6 years. If you’re a Corona driver who wants to shorten that term, you’re not alone. Learning how to pay off a car loan early can relieve you of financial burdens. Here are some reasons and benefits for paying off a car loan early:

  • Debt-to-Credit Ratio: Your debt-to-credit ratio is something potential lenders look at. If you’re trying to reduce it to get another car, or a mortgage, paying off a car loan early can do so.
  • Interest: The biggest advantage of paying off a car loan early is the savings on interest, which adds up over time.

Is it Good to Pay Off A Car Loan Early? Reasons to Wait

Some Riverside and Ontario drivers might be surprised to learn that there are reasons to wait before you decide to pay off a car loan early! Check out these factors before you pull the trigger:

  • Penalties: There are some loans that include “Prepayment Penalties,” a clause that includes a fee if you decide to pay off the loan early. Check on your loan agreement, contact your lender, and decide which is the best course of action.
  • Credit Score: It doesn’t hurt your credit score to pay off your loan early. However, some people find monthly car payments an extremely useful means of building their credit score steadily.
  • Refinancing: You don’t have to choose just between paying your current payments or putting a lot of money into completing it. Refinancing a loan is another option that can help you lower your payments without the risk of prepayment penalties. Talk to a finance center about this option!

Learn More About Financing with BMW of Murrieta!

At BMW of Murrieta, we’re proud to have a dedicated finance center to help Murrieta drivers find workable payment plans. With that, in addition to our new vehicle specials and trade-in options, we’re prepared to get you behind the wheel of your next vehicle. Apply for financing online and contact us with any questions about how to pay off a car loan early and more!

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