For most drivers, a car loan is a necessary part of the car-buying process. However, you can significantly improve your overall financial situation when you pay off these debts early. If you have some extra money available, consider the following before deciding to go with a payoff.

Why Pay Off a Car Loan Early?

Paying off your principal in advance could help you save thousands of dollars in interest payments over the lifetime of the car loan. This gives you more money that you can use to pay off other debts or put into savings. It also helps you avoid depreciation, causing you to owe more on your loan than your vehicle is worth.

What Should You Consider First?

While paying off your loan early is usually a good idea, there are a few situations where it may not be advisable. Some loans charge prepayment penalties, which means you could incur additional fees each time you pay more on your loan principal. Also, if you have other debt or loans with higher interest rates, it's best to pay those off first.

How Do You Pay Off Your Car Loan?

There are several ways you could pay extra toward your car loan principal. First, you could apply an extra payment toward the principal with each monthly payment. You could also make bi-weekly payments, increasing the number of payments you make throughout the year, or you could make additional payments after an extra pay period, tax refund, or bonus.

From help with car loans to opening a savings account, you can rely on The Missouri Bank in Wentzville, MO, for a wide range of financial services. Serving Warren, St. Charles, and Gasconade counties since 1939, this local bank continues to innovate with great services and solutions, including mobile and online banking. To learn more about what they can do for you, visit them online or call (636) 327-4900.