The market is currently ripe for those consumers looking to take advantage of lowered interest rates and refinance deals. Refinancing those loans means securing a new way of borrowing money from another lender while they pay off your last loan. Before considering refinancing or paying off your auto loan early, make sure you will not get charged any prepayment penalties.
When signing your initial loan agreement paperwork, it is important that you read all the fine print and understand the complete terms of your contract. A prepayment penalty is an additional charge levied onto a consumer for paying off their loan amount prior to its due date. Penalties for early auto loan payment can range from $50 to $200, depending on the terms of your contract.
If you think you may be subject to penalties for early auto loan payments, simple math can help you gauge whether or not it may be worth paying off. If the amount you save on interest payments will exceed the cost of a prepayment penalty by a significant amount, it would be wise to pay off your loan as soon as possible and take the charges.
The best time to address any penalties for early auto loan payments is before you sign a contract for your initial auto loan. Make sure to read the fine print carefully before signing on the dotted lie. That can end up saving you money and frustration if you want to pay off your vehicle earlier than the contract’s due date.