Pay Out Car Loan Early? Here's How to Save Big

Are you feeling burdened by your car loan and wondering if you can pay it off early? Whether you're looking to reduce your debt, save on interest, or simply gain financial freedom, paying out your car loan ahead of schedule can be an attractive option. However, it’s essential to understand the implications and how to go about it efficiently.

Understanding Car Loan Payouts

Paying out a car loan early means settling the outstanding balance of your loan before the end of its term. While it can save you money on interest, it may also involve fees or penalties. Understanding the terms of your loan agreement is crucial, as lenders often have specific conditions regarding early repayments.

Interest Rates and Requirements

The interest rate on your car loan can significantly affect the cost of paying it out early. In Australia, car loan interest rates typically range from 6.49% to 12% in 2026, depending on factors such as your credit score, the lender, and the loan amount.

Before deciding to pay out your loan, check the following:

• Early Repayment Penalties: Some lenders charge an early termination fee, which can range from a few hundred dollars to a percentage of the loan balance.
• Outstanding Balance: Understand what you still owe, including any interest up to the payoff date.
• Loan Terms: Review your loan contract for any clauses related to early payouts.

Lender	Interest Rate	Early Repayment Fee
Lender A	6.49%	$200 flat fee
Lender B	8.75%	1% of remaining balance
Lender C	10.5%	No fee

Steps to Pay Out Your Car Loan Early

1. Contact Your Lender: Start by reaching out to your lender to get the precise payout figure and inquire about any fees for early repayment.
2. Review Your Finances: Assess your financial situation to ensure you can afford the payout without compromising other financial obligations.
3. Make the Payment: Once you have the payout figure, arrange to make the payment. This can often be done via bank transfer or by visiting a branch.
4. Confirm Closure: After making the payment, confirm with your lender that the loan is closed and request a closure letter for your records.

Tips and Considerations

• Check for Alternatives: Consider whether refinancing your car loan might be a better option. With access to over 83 lenders, Esteb and Co can help you explore competitive rates.
• Budget for Fees: If your lender charges an early repayment fee, factor this into your decision to ensure it’s still cost-effective.
• Impact on Credit Score: While paying off debt can positively affect your credit score, ensure you continue to manage other credit lines well.
• Weigh the Benefits: Calculate your potential savings on interest against any fees incurred from early repayment.

Frequently Asked Questions

1. Can paying off a car loan early save me money?
Yes, by reducing the amount of interest you pay over the life of the loan, especially if your interest rate is on the higher side of the spectrum.

2. Are there any penalties for paying off a car loan early?
Some lenders charge an early repayment fee, which varies by lender and loan agreement.

3. How do I find out if my car loan has an early repayment penalty?
Review your loan agreement or contact your lender directly for details on any penalties.

4. Can I negotiate the early repayment fee?
While not always possible, some lenders may be open to negotiation, especially if you have a good payment history.

5. Is it better to pay off my car loan early or invest the money elsewhere?
This depends on your individual financial goals and the potential return on investment compared to the interest saved.

6. Does early repayment affect my credit score?
Paying off a loan can improve your credit score by reducing your overall debt, but maintaining a healthy credit mix is also important.