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What are the benefits of paying my car off early?
I won $20,000 on a scratcher's ticket, and I want to do something fruitful with the money. I instantly thought of my car loan. Are there any benefits to paying it off early?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
That’s quite a stroke of luck there with the scratcher’s ticket and kudos for wanting to do something fruitful with the money!
Paying off your
car loan
early can provide a number of benefits that you’ll see immediately, including:- Saving money on interest
- Avoiding negative equity
- Lowering your debt-to-income ratio
- Freeing up more money for savings or other expenses
However, you might also find some cons with paying your loan off that you should consider before you make that lump-sum payment:
- Your lender may haveprepayment penalties
- Your credit score make take a slight dip
- You could use that money for other expenses or high-interest debt
At the very least, you could simply make a lump-sum payment that’s not the entirety of the loan. This pays down your loan, but you still have some leftover cash for other things.
If you want to maximize the amount of money you save each month, take a look at your car insurance policy and compare it with quotes you find with
Jerry
. With Jerry, you can look at dozens of rates from up to 50 different insurance carriers. Average Jerry users save $879 per year on car insurance. View full answer
- Gregory R.
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