Top 3 Benefits of Paying Off Your Auto Loan Early
Have you bought an online car loan and now you are planning to pay off the loan early? Then, that will have to be done with a lot of discipline and determination because paying off the loan means paying the amount from our savings. Basically, we take up car loans so that we can have a car for ourselves. Car is not a luxury these days, but rather it is a need that we all need at some point in time. So, taking a loan for our needs is not something that we can ignore, and the only thing that we should worry about is that the payment has to be made on time and if few payments are missed, then remember that the lender has all the rights to seize the car.
Now don’t wonder why he would seize the car, that is because your car acts as a surety when you take a loan from the lender or bank.
1. Interest amount gets saved: We already said you that there will be benefits if the loan is paid off early and the first thing is the interest rate can be saved. Payment for the car loan is where you must pay for both the principal amount and the interest rate.
Let us get this straight with an example: We will think that you have taken a loan amount of £50,000, with an interest rate of 2% and the tenure period is let’s say 2 years. So, when the interest is calculated it will get amounted to £1,000/month and for 2 years it will go to £24,000.
So, if you are planning to pay off the loan earlier may be in 15 months or so, then you could save £9,000. This amount is not small, and it can be used for other savings.
2. Can free up from other debts: As you know that you can save money from the interest amount, so what can you do with these extra savings is the actual question. Paying off the loan early can also free you up from other debts because with that extra savings, you can start paying that for other debts or clear off other bills.
3. Avoid owing more to the lender: We are better aware that, longer the term period, higher will be the interest paid. I believe that not everyone is rich enough to pay extra money than the car’s worth. So, it is good to pay the loan early and avoid the risk of paying extra to the lender.
It is not always the benefits that we talk, every loan when it is taken or in the phase of paying it back will have its own pros and cons.
Paying this car loan might seem the right way to save on a lot of money but there are few lenders who actually charge a penalty for paying it early. Yes, there are lenders who charge prepayment penalties to the ones who clear the loan before the mentioned tenure period.
So, it is better to read on the terms and conditions in the first place and see if the cost of the fee outweighs the amount that gets saved by paying the loan early.