How to Determine the Payoff Amount on an Auto Loan

The payoff amount on an auto loan is not just the amount remaining on your principal. You will have to pay off the principal, add in your interest payments and also factor in any prepayment penalties or any other lender costs. Most people neglect to take into account prepayment penalties; however, car loan terms typically include large fees for prepaying, particularly if the loan is from the dealer. There are several ways to find the amount needed to pay off your car loan today.

Contact your Finance Company

The fastest and most accurate way to find out the cost of closing your loan today is to get the quote from your finance company. There are several ways to do this, but the fastest way is to attempt to find the quote online. You will need your account number in order to determine your payoff quote. If you do not have it, look at your most recent auto payment bill to find the amount. You may be able to locate your account number by providing your VIN number. Once you have your account number, sign on to the website for your finance company. The website should have a section tracking your payment history. On most sites, there is a payoff quote in this section. If you cannot find it here, try using a search feature to look for "payoff quote."

Do the Math Yourself

If you'd rather estimate your payoff on your own, then follow these steps. First, take a look at your loan contract. Determine the total principal amount on your loan, and then factor in your interest payments over time. You will need to use annual percentage yield, not annual percentage rate, to find this. APY can be found using the formula below:

APY = (1 - rate per period) (number of periods per year - 1)

This will give you the total cost interest on your car loan. Add this to the principal amount of the loan. Subtract the sum of the payments you have made so far. This would be the sum you would owe without prepayment fees. You will need to next check your loan contract for prepayment fees. Ultimately, your prepayment quote will be this:

Prepayment = Principal + APY + Prepayment Fees

Seek a Refinance or Settlement Loan

If you want out of your current car loan but do not have the cash to simply pay it off, consider taking a new loan to refinance or settle the debt. Most people choose this option to go from an adjustable to fixed rate or to go to a lower interest rate altogether. In a settlement option, you may be able to pay off the loan for less than your prepayment quote. Ultimately, any form of prepayment will damage your credit slightly. Settlement will have the largest negative repercussions on your credit score and it will also have the largest financial reward to you.


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