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How much is the prepayment penalty on a car loan?
I want to pay off my car loan, but my lender told me there's a prepayment penalty. How much is the prepayment penalty on a car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
The average
prepayment penalty
on a car loan is about 2% of the outstanding balance. So if you owe $20,000 on your loan, you end up paying an extra $400—which is a substantial amount.However, there are some ways to get around this penalty. The best way is to refinance your vehicle with a lender that doesn’t have a prepayment penalty. The process is the same as getting a car loan and shouldn’t cost you anything out of pocket.
After you refinance, you may be able to pay off the loan in the first month, or you might make one payment and then pay it off, depending on the stipulations of your loan.
If you’re looking to refinance your car loan, start your search with the
Jerry
app. Avoid the hassle of researching and sending documents to potential lenders. Jerry’s app instantly connects you with top companies and takes into account your specific financial needs to find a loan that best meets those needs.View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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