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Does paying off a car loan early save on interest?

I just took out a car loan that seems to be a mistake. (At an interest rate of 19.58% on a 12,777 laon) Since i have no knowledge about finances i first wanted to know if this was a bad decision. secondly, if it is a bad decision, how can i save myself money since i can’t get out of this deal? Will paying it off early help?

12 Comments

  1. Nevxik says:

    i dont no.

  2. another_band_geek says:

    with that high of an interest rate paying it off as soon as you can is the best thing to do

  3. livewire_usa says:

    Paying it off early will help because it’ll be payed for and you won’t be making anymore payments. That is high intrest rate and getting that thing paid off will help you in many ways. It’ll give you better credit which will generally lower your intrest rate of anything else you buy after that. Good luck

  4. traffic814 says:

    You can’t get out of it, as there are early penalty if u pay early.
    ————————————————
    http://www.bestcreditrates.net

  5. E Yow says:

    Paying it off early will save interest, yes.

    That is a high interest rate, but since I don’t know anything about you I can’t tell you whether you could have gotten a better deal. Of course, your statement that you “have no knowledge about finances” implies to me that perhaps it was the best deal you could get.

    In any case, yes, you’ll save money by paying it off early.

    How long is the term of the loan? If it’s for 5 years, you’re paying around $335/month, and over those 5 years, you’ll pay a total of $7355 in interest. That means that the $12,777 car will actually cost you $20,132. If it’s a longer term, you’ll have lower monthly payments, but the interest will go WAY up.

    Hope that helps – good luck!

  6. erom m says:

    It depends on the type of loan; fixed or variable?

  7. Bonnie says:

    WOW – that is an incredibly high rate. If you can pay it off early, it will save you at least 4000.00.

    If you can not pay it off early, go to your nearest bank or credit union and ask to refinance the car loan. They might be able to get you a better rate depending on your credit.

    If you can not get a loan with a bank, I would make as many extra payments on it as you can, because even putting just 25 dollars extra a month can save you some money.

  8. importabuzer says:

    It will be listed in your contract if there is a penalty for early payoff – most do not.

  9. Mariposa says:

    Yes. The lower your balance, the less amount you will be charged in interest fees. By paying early, you will be cutting down costs and the amount of payments you will have to make. Plus, the lower your balance, the more your score will go up.

  10. stan c says:

    Most loans are open end, which means if you pay anything above your normal payment, it will save you interest at the end of the loan. Also, most banks will hit you with 70% of the interest on the first half on the life of the loan because most customers think their saving a lot of interest by paying it off early.

  11. DaMan says:

    Assuming that the loan agreement does not include a clause for penalty interest for early payment of loan then YES, you would save on interest.

  12. spifiman1 says:

    Sure it will. Auto loans are simply interest meaning there are no penalties for paying them off early.

    Now, one thing you might want to consider, the interest rate you are paying is high. This makes me think that your credit was not so good shall we say. Make at least 12-payments before you pay this off. The reason for this is that when lenders look at credit applications one of the things they look for is at least 12 months paid as agreed on a installment loan.
    So by making at least 12 payments your score will come up and you should get a better rate when you purchase your next vehicle.

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