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What is a payoff amount on a car loan?
I overheard my dad and brother talking about a payoff amount on his car loan, and they seemed to be pretty frustrated. I didn’t want to interrupt them or bring it up again, but I’m curious why they got so upset. What is a payoff amount on a car loan?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
The payoff amount on a
car loan
is the total amount that needs to be paid to end your loan agreement.The payoff amount is typically only brought up if you’re looking to get out of the loan agreement early and usually includes the remaining balance of your loan, interest, and lender fees like
prepayment penalties
.Lenders make money by collecting interest on a loan, so if you want to pay off the loan early, you will also need to pay the remaining interest that the lender would otherwise lose by ending the loan early. Lenders also typically apply a prepayment penalty to ensure they don’t make less off the loan by releasing you early. Your dad and brother were likely frustrated by the interest amount and lender fees.
Hopefully, your dad and brother will get the payoff amount sorted out and have full ownership of the car soon. If you want to be a helpful sibling and possibly learn more about why they are frustrated, you should start a conversation about how expensive owning a car is and recommend they use Jerry to save money on their
car insurance
.Jerry
is an insurance comparison app that shops for low prices with over 50 different insurance companies, including Nationwide, Allstate, and Travelers, 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. They’ll even help you cancel your old policy!View full answer
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