There are many reasons why you might want to pay off a car finance agreement early. If you are taking out a car finance package, you may already know that your circumstances might change during the agreement that leaves you better off than when you start. This could be a change of job, a promotion, or simply coming into some money. So you might already be thinking that you can pay off your car finance early. Alternatively, you might have come into a situation where you can no longer afford the payments, and want to lessen the burden on yourself. Or you might think you are able to get a better package on a new or different car finance deal. So what should you do?
In all instances, but particularly if you are struggling to meet the repayment plan, Creditplus recommends you get in touch with your finance provider. If they are FCA-approved and operate ethically, like Creditplus, they should do what they can to ensure your car finance agreement does not leave you in a difficult situation. Speak to the provider and explain your situation. And if you are struggling with debt, you should contact a free debt advice charity, who will be able to provide practical tips on balancing your finances.
If you are going to pay off the remaining balance early, you should check your contract to see if there are any early repayment fees. Remember, most finance providers earn their money from the interest charged on the amount you borrow, so by paying it off early you will leave them out of pocket. Early repayment fees are often included as a way to negate this. Check your contract and see what is written.
If you are near the end of your contract, you may want to calculate the total cost of the finance package, and the cost of paying it off early with the repayment fees. By seeing both figures, you can see which one works out cheapest for you. It may be worth keeping up the finance deal for a few more months if it means you end up avoiding large early repayment fees. You might also want to consider increasing the size of your payments, so you pay off your car earlier without incurring the same level of fees.
A car’s condition is one of the big factors in how the finance agreement is set, especially on a Personal Contract Purchase (PCP) finance package. If your car has undergone cosmetic damage or needs a repair, consider doing this before you attempt to repay early, as you might end up owing more than you thought you did.
If you are after a better deal, for example if you know your credit score has improved since the start of the package, it might be worth looking at refinancing your finance package. Speak to your broker and see what they can do for you in terms of a new deal. You could end up with a shorter loan at a better rate of interest. Just ensure you look at all the costs involved before you make a decision.
If you have any questions about car finance packages, either existing or new, get in touch with Creditplus. Our team of trusted and trained customer consultants are ready and waiting to help guide you through getting the right car finance package for you.