Paying Off Your Car Loan

Once your new car is in the driveway, your new car payment book is also in your top desk drawer. Paying your car loan each month in a timely manner is key to keeping your credit score high. It ensures that your car will stay in your driveway and that you will be able to buy another new car when this one wears out. But what is the best way to do that?

Most large lenders, especially the dealer finance companies such as Chrysler Financial and GMAC, offer the option of making your monthly car payment online. The benefit to paying it online are that you get an immediate notice of payment and you do not have to worry about the payment getting delayed or lost in the mail. Plus, it cuts down on trips to the post office to get stamps or to mail in your payment. When you pay online, you have access to your payment history and your balance each time you pay online. This helps to keep your payments on time.

Direct automatic payments

Many lenders allow you to arrange for your car loan to be automatically withdrawn from your account at an agreed upon date each month. This arrangement frees you from worrying about this monthly expense and guarantees a perfect payment record. One potential problem with this payment system is the risk of electronic manipulation and theft. Also, some car buyers do not want to give up control over their funds

Paying off your loan early

The longer your loan, the more interest you will pay on your car. And the more your lender makes on your loan. When you negotiate your loan, check to make sure there are no penalties for paying off the loan early. If not, you may want to make an extra car payment at least once a year, if not more often. This strategy can seriously reduce your overall payment on the car. Also, if you have a sixty-month loan and you want to trade in your car after the third or fourth year, you will still have an outstanding loan on your old car. However you choose to do it, it is important that your payment history is consistent and on time.