Paying Off Your Car Loan Early in Canada
01
Check for penalties first.
However, some subprime and dealer-arranged loans include prepayment penalties of 1–3 months interest.
02
Extra payment strategies.
Check your loan agreement or call your lender to confirm. If there is no penalty, early payoff is almost always beneficial. Even modest extra payments make a significant difference.
03
Lump sum impact.
On a $20,000 loan at 14.99% for 60 months, adding just $50/month to your regular payment saves $1,680 in interest and pays off the loan 8 months early.
04
When NOT to pay early.
This alone shaves 6–8 months off a typical loan.
05
Planning your payoff.
When NOT to pay off early: if you have higher-interest debt (credit cards at 19.99%+ should be paid first), if the prepayment penalty exceeds the interest savings, if paying early depletes your emergency fund (keep 1–3 months expenses saved), or if you need the cash for a higher-priority expense..
06
More tools to help you.
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