Can You Save by Paying off Car Loan Early?

Dear Driving for Dollars,

According to my monthly statement, I have about $6,000 left to pay on my car loan, which ends in about 18 months. If I pay off the car loan early, will my cost be less than $6,000? How can I determine how much I will save?

-- Rashavia

Dear Rashavia,

Yes, you can save money by paying off your car loan early. Because you are most likely more than halfway through your loan, most of your payment is currently going toward the principal. That means your savings may not be substantial if you are planning to just add a small amount to the monthly payment.

To have the greatest savings, you would need to pay off the entire balance as soon as possible. To calculate your savings, use Bankrate's car early payoff calculator. Be sure to check your car loan paperwork to ensure there is no penalty assessed for an early payoff.