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Can you pay off a car loan early without a penalty?

Are you curious if you can payoff a loan early without penalty?

Nicholas Hinrichsen - Published: September 21, 2020

Congratulations - you want to payoff your loan early! Depending on how much you choose to payoff, there may or may not be penalties or benefits. There's two cases worth talking about:

You're paying the entire loan balance off. In these cases

  • There is rarely a penalty for paying off the entire balance.
  • Some lenders do suffer losses from an early payoff and so will make the process highly inconvenient, but its rare to have penalties


You're paying only part of the balance or want to make additional principal payments. In these cases

  • The lender may NOT apply your additional payment to principal only. Instead, lenders may count this as "future payments" and still collect interest from these additional principle amounts
  • Make sure you CALL the lender and confirm the additional payments go to principal only
  • If a lender is unable apply payments to principle or partial payments easily, please switch lenders and consider refinancing your car to work with a more accommodating lender


Haven't explored refinancing yet?
WithClutch.com is a fully digital platform that lets car owners like you do so from the comfort of their own home. No need to set a foot in a bank or credit union. You can lower your rate or get cash in as little as 20 seconds.

Follow three simple steps to refinance your auto loan, get approved in seconds and save thousands in minutes.

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