In 6 or 7 year loans are there penalties for early payoff?

[RickW]

Hi,

I am wondering if most banks offer early payoff of 60 or 72 month loans without adding extra fees? Also is the payoff the amount borrowed with whatever interest has accrued up to that point?

If there is no penalty (as in Tesla's loans), then would it not be best to go with the lowest monthly payment loans, say 72 or 84 months, and paying them off at a later date?

Thanks

 

[boaterva]

As far as I know no current loan has a penalty for early payoff. You can end it at any time and pay off the balance. I have a 0.99% from Alliant that’s that way. If you can get a good deal and expect you will have money to pay it off early later, go for it.

The payoff is the cash balance for the principal. What you owe on the loan itself. No interest at all.

 

[srs5694]

Check with your lender.

The auto loans I've had recently have had no penalty for early payoff; however, that's no guarantee that yours will be structured in that way.

Also, even if there's no penalty for an early payoff, the interest rate on longer-term loans is usually greater than on shorter-term loans, so you'd be better off with the shorter-term loan than with taking the longer-term loan and paying it off more quickly. Again, though, that could vary from one lender to another, so you might luck out and find a longer-term loan with no early-payoff penalty and an interest rate that matches what you'd get on a shorter-term loan. As always with this sort of thing, there's no substitute for finding the details of the individual loan products available to you. What's available to you may not be what's available to some random person on a Web forum, both because of differing credit histories and because of different lenders in different areas. (Small local banks and credit unions often beat big national and regional lenders for terms.)

 

[brkaus]

There is also the risk that you “forget” to pay it off early. The longer the loan, the more likely you are to be underwater on the car value.

No penalty to pay off my 72 mo note early.

 

[rickdogg82]

IMO it only makes sense if you must have the lower payment for affordability and are expecting a windfall that will allow you to pay off the loan early. I did something similar with my loan. I went with a six year loan instead of four or five knowing that when I sold the car I was replacing, I would use that money (plus CA rebate money) to pay down the loan effectively making it a 4.5 year loan (and lower payment).

And yes I understand that I could have taken the money from the sale of the car invested it with a greater return. But the deal going in (with my wife) was that we would do this. Plus by selling the car private party we came out about $3K ahead of trading it in or selling it wholesale. The CA rebate money WAS invested.

 

[glide]

That would depend on the terms of your loan.

Read your paperwork or call your lender. No one here can tell you definitively.

 

[M3BlueGeorgia]

Hi,

I am wondering if most banks offer early payoff of 60 or 72 month loans without adding extra fees? Also is the payoff the amount borrowed with whatever interest has accrued up to that point?

If there is no penalty (as in Tesla's loans), then would it not be best to go with the lowest monthly payment loans, say 72 or 84 months, and paying them off at a later date?

Thanks

Usually not. It certainly would be extremely unusual to see that in the USA. Probably also true for Canada and Western Europe.

However 84 month loans usually come with a higher interest rate, so that's another factor to take into account. Usually 72 month is the sweet spot for this strategy.

 

[RickW]

Thanks everyone. I read the fine print yesterday and was told by my loan agent that there is no penalty for early payment or payoff. Relieved. I like to take loans with smaller monthlies and then pay them off early. It’s sort of protection if something bad happens and I can’t afford to pay a large note. A buffer so to speak.

 

[Uncle Paul]

Car loans are heavily front interest loaded, according to the rule of 76.

Most of the first payments are mostly interest, while the principal is usually recaptured at the end of the loan.

If you wish to prepay, under these terms, the bank is usually happy to comply.

 

[Gigaron]

As far as I know no current loan has a penalty for early payoff. You can end it at any time and pay off the balance. I have a 0.99% from Alliant that’s that way.

0.99%? How and where do I apply?

 

[FielderJones]

0.99%? How and where do I apply?

Alliant Credit Union | Nationwide Digital Banking, Credit Cards, Loans

 

[Gigaron]

Alliant Credit Union | Nationwide Digital Banking, Credit Cards, Loans

Their web page says 3.24 % APR. did you take out your loan several years ago?

 

[boaterva]

Their web page says 3.24 % APR. did you take out your loan several years ago?

It was a common thing for S and X loans whenever Tesla wanted to goose sales. Never for a 3. If you are in the market for an S or X I’d check back halfway through each quarter.

You could also see if the Alliant loan person I worked with is still there and has any promotional rates:

Jason Freese
Loan Consultant
[email protected]
Direct Phone: 773-462-2164

 

[Sophias_dad]

Car loans are heavily front interest loaded, according to the rule of 76..

I'm pretty sure you mean 'rule of 78', and pre-computed loans like that are happily, becoming rarer. That said, it is a really good thing to check that they are using the 'simple' interest method.

 

[Gigaron]

It was a common thing for S and X loans whenever Tesla wanted to goose sales. Never for a 3. If you are in the market for an S or X I’d check back halfway through each quarter.

You could also see if the Alliant loan person I worked with is still there and has any promotional rates:

Jason Freese
Loan Consultant
[email protected]
Direct Phone: 773-462-2164

So Alliant was somehow "encouraged" by Tesla to offer lower rates? I'm in the market for a 3, so I guess I am out of luck no matter what.

 

[boaterva]

So Alliant was somehow "encouraged" by Tesla to offer lower rates? I'm in the market for a 3, so I guess I am out of luck no matter what.

We assume it was a marketing effort at that time. No confirmation was ever made, but the timing was always suspect, as the offers came and went at mid-quarter or so to meet end of quarter demand, etc.

 

[wayoutwest]

So Alliant was somehow "encouraged" by Tesla to offer lower rates? I'm in the market for a 3, so I guess I am out of luck no matter what.

Nice - i am already an Alliant member and have had numerous mortgage/car loans with them over the years. I will reach out to your guy and see what he says. Thanks!