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Is it possible to pay off a car loan early?
I just celebrated my 30th birthday, and my parents offered to pay off my car loan as a gift. This is incredibly thoughtful of them, but I only have 11 payments left, and I’m not even sure how paying off the loan would work. Is it possible to pay off a car loan early?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
That’s an incredibly kind gift from your parents, and yes, you can pay off your
car loan
early. But depending on your situation, it isn’t always the best idea. Paying off your car loan early has many benefits, such as:
- Having full ownership of your vehicle with a free and clear title
- Having some additional disposable income each month by no longer having a monthly payment with interest
- Improving your debt-to-income ratio
- Avoiding anupside-down car loan
However, paying off your car loan early has drawbacks as well, such as:
- Causing a temporary dip in your credit score
- Not being the most effective use of money, especially if you have other debts with higher interest rates
If you decide having your parents pay off the loan may not be the best idea, you could ask them to reimburse you for monthly payments instead or just ask for the payoff balance in cash.
However, if you decide to take your parents up on their offer and pay off your car loan, you should let your
car insurance
company know so that they can adjust your rate.To ensure you aren’t overpaying for your coverage, give
Jerry
a try. Jerry is an insurance comparison app that shops for low prices with over 50 insurance companies for free. You will get quotes in seconds, can make changes at any time, and if you ever have any questions, agents are just a text away! The average Jerry user saves $879 a year on car insurance.View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
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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