If you’re thinking of buying a new or pre-owned car but aren’t sure how much of a monthly payment you can afford, Allegiance’s Auto Loan Calculator and free Credit Score feature is a great tool to help you learn more about the car buying process and monthly payments.
Decoding the Auto Loan Calculator
An Auto Loan calculator is an online banking tool that allows you to see all of your options before you commit to buying a car. It provides important information about your loan and vehicle purchase so that you can determine how much you can afford to spend and what the monthly payment will be.
While an auto loan calculator cannot tell you the loan details you qualify for, you can enter the loan amount, interest rate, and terms to determine a monthly payment for a variety of different scenarios. This allows car buyers to prepare financially for vehicle purchases, so they know exactly what to expect while shopping.
Revealing Potential Savings
By utilizing an auto loan calculator, savvy car buyers can walk onto the dealership lot with valuable information that can assist with their auto purchase. Knowing how to save money by being aware of how different loan terms and interest rates affect the money you spend and the amount of your payment means knowing if the car you want is within your budget.
Just changing the loan terms and interest rate while using the auto loan calculator will show you the different payment options you have and what rate and terms are required to keep your payment where you need it to be. For example, a $20k car loan at 6% for 4 years has a monthly payment of around $470 while a $20k car loan at 6% for 6 years has a monthly payment of only $331. This also provides a powerful tool when negotiating the price of a car.
Strategy for Early Loan Payoff
In addition to preparing you for your car purchase, an auto loan calculator can also give you a strategy for early loan repayment. Just by punching in the necessary criteria, you will see how much extra you would need to pay each month to do so.
Financial Advantages of Paying Off An Auto Loan Early
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Save on interest
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Improved insurance options
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Save money on monthly payments
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Improves debt-to-income ratio and increases credit score
Advantages of an Auto Loan Calculator
Auto loan calculators offer several advantages for car buyers and owners. They're a comprehensive financial planning tool that allows you to make informed decisions by determining the cost of your monthly car payment or payoff. In addition, the calculator can help you decide on your budget and also compare different financing options to fit your individual financial situation.
Optimal Timing for Early Auto Loan Payoff
If you're considering paying off your auto loan early, it's important to determine exactly when early repayment makes financial sense. This includes balancing early payoff with other fiscal responsibilities. It's a good time to consider ridding yourself of this debt if:
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You don't have other high-interest debt like credit cards
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The interest rate on the loan is high
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A lower debt-to-income ratio is needed for a home purchase
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To free up cash for other financial goals
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Avoid negative equity or being upside down on your Auto Loan
Weighing Early Auto Loan Payoff
There are pros and cons to each scenario concerning early auto loan payoffs. Consider these examples before paying off your auto loan early.
Pros of an Early Loan Payoff:
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More cashflow due to no monthly car payment
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Credit score improvement
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Saving on interest
Cons of an Early Loan Payoff:
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Possible prepayment penalties
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Stretching a tight budget to make the early payoff
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The urge to buy a new vehicle
Refinancing Options with Allegiance
If you already have an auto loan somewhere else, it may be a smart financial move for you to refinance with Allegiance Credit Union. Reasons you should consider refinancing your auto loan may be, to lower a high-interest rate, free up cash in your monthly budget or to reduce your debt-to-income ratio.
Whether you want to purchase a new or pre-owned vehicle, or refinance an existing high-rate loan, Allegiance can help! Contact us today to learn more about our tailored auto buying and refinancing auto loan solutions.