Car Loan Payoff Calculator

How to Pay Off Your Car Loan Faster and Save Money

Paying off a car loan early can save you hundreds or even thousands of dollars in interest payments. Our car loan payoff calculator helps you understand how extra payments can reduce your loan term and total interest paid.

Understanding Car Loan Amortization

Car loans work on an amortization schedule, which means your monthly payments are applied first to interest and then to principal. In the early stages of your loan, a larger portion of your payment goes toward interest. As time progresses, more of your payment applies to the principal balance.

Benefits of Making Extra Payments

Even small additional payments can significantly reduce your loan term and total interest costs. For example, adding $50 to your monthly payment on a $25,000 loan at 5% interest could shorten your loan term by nearly a year and save you hundreds in interest.

Strategies to Pay Off Your Car Loan Faster

1. Bi-weekly payments: Instead of monthly payments, pay half your monthly amount every two weeks. This results in 26 half-payments, or 13 full monthly payments per year.

2. Round up payments: Round your payment up to the nearest $50 or $100 to reduce your principal faster.

3. Use windfalls: Apply tax refunds, bonuses, or gifts toward your principal balance.

4. Refinance: If interest rates have dropped since you took your loan, consider refinancing to a lower rate.

What to Consider Before Paying Off Early

Check if your lender charges prepayment penalties. Also, consider whether your money might earn more if invested elsewhere rather than paying off low-interest debt early.