An early payoff calculator for your car loan is a powerful tool that is easy to use to review your current auto loan and early payoff savings. Early loan payoff calculators can be used to find out how much you might save if you pay down the loan to pay it off early or add extra payments to your payment schedule. While a car loan early payoff calculator is easy to use, there are a few things you should keep in mind while analyzing the results. There are also serious credit implications to consider before you pay off any debt early.
Benefits of Utilizing Early Loan Payoff Calculators
Even paying a paltry $20 a month extra on your loan can help you curtail high-interest rates. If you have more than that to apply to your loan each month, you may find that you can pay off your loan significantly early. Using an early payment calculator will save you time and help you come up with a more accurate estimate of your pay-off date. When doing this type of calculation manually, it is easy to forget to account for APR or the initial repayment terms.
Using A Car Payoff Calculator
Most auto loan early payoff calculators consist of five boxes, the first of which is typically reserved for the original loan balance amount. You should place the entire loan amount from the original loan term into this box. The next box down is often for the annual percentage rate or APR section. This is the percentage rate your dealer’s financing department gave you when you purchased the car. A typical APR rate is between 3% and 5%, although this figure varies according to many factors. If you have refinanced, your rate is likely higher.
The next box in the car loan early payoff calculator is often labeled “initial term in months“ or the original loan term. This is simply the number of months in which you agreed to pay your loan back. A typical auto loan term is around 48 months. Next, you will need to specify the number of payments you have already made on your loan. The last box in the calculator is often reserved for the additional amount in dollars that you plan to pay on your loan each month.
Once you have supplied these numbers, the loan payment calculator will let you know how much can be saved in interest and how quickly you will own the car with prepayments compared to your original loan plan payoff amount. Note that each calculator may place these boxes in a different order. However, they will always be clearly labeled. It is a good idea to use an auto loan early payoff calculator for this because the formulas for these figures are built-in.
Credit Considerations and Fees
Your financier may charge a fee for terminating the loan early.
Clearly, the more you can pay each month in principal, the less you will pay in interest. However, banks are not crazy about this idea. When you signed up for financing, you agreed to pay your loan over the specified time frame.
It is important that you check with your financier to see if they charge a fee for terminating the loan early. If they do, compare the fee with the auto loan payment calculator’s prediction of how much you will save on interest.
If the two numbers are not far off, you may want to use your extra money for another use. Although having one less account on your credit is a great thing, paying on that account on time month after month has a positive effect as well.
Keep in mind that your credit rating is not a “good consumer behavior” score. Lenders and especially subprime auto lenders are more concerned with your overall ability and inclination to pay off a debt over the long-term than they are with your ability to pay off the car loan early.
Credit reporting agencies are now offering something called auto enhanced scoring. This credit score system looks closely at you payments on your car loans you have had in the past.
The most important consideration to a bank is whether or not the loan recipient has demonstrated regular monthly payments in the past. Keep this in mind when you check your current debt load. If you’ve received a sudden windfall but know you are likely to rely on credit in the future, it may be a better idea to payoff another debt or invest this money elsewhere than pay off your loan early. A car payoff calculator can help you do that.