Can you pay off your car loan early?

What's involved with repaying your car loan early? Find out if you can save time and money.

Car loans can be a great financial product to help you get on the road. However, there are a few features you need to be aware of before applying to make sure you don't restrict yourself down the track.

One of these is the ability to repay your loan early. As car loans are secured and many come with a fixed interest rate, lenders place restrictions around whether you can repay your loan early. If lenders do let you repay early you're usually charged a fee. Find out everything you need to know in the guide below.

How do early repayments work?

There are a few different types of early repayments:

  • Additional or lump sum payments. These are made during the loan term and do not result in your loan being repaid in full. Lenders still may place restrictions on these payments, especially with fixed rate loans. On variable rate loans, you will find fewer restrictions and you may also be able to redraw additional payments using a redraw facility.
  • Repaying your entire loan on a variable rate loan. You will find fewer restrictions with a variable rate loan on repaying your entire loan amount before the end of the loan term. In this situation, you repay the loan balance on a variable rate loan or you will be out of your fixed rate period. Break fees are not likely to apply as lenders do not lose as much from letting you repay early.
  • Repaying your entire loan amount during a fixed rate period. This is where you will find the most restrictions applied. Repaying your entire loan early in this scenario involves paying whatever the loan balance is due to the lender during a fixed rate period, or where a fixed rate already applies to a loan. Here, break costs and administration fees are likely to apply to help the lender cover costs lost to them.

Here are the brands that let you pay off your car loan early, including fees that may apply.

BrandCar loan/sCan you repay early without penalty?Fees that apply
ANZOnline Secured Car LoanNo$50 administration fee plus $680 pro-rata for unrecovered costs of providing the loan. Break costs may also apply.
AussieAussie Car LoanNoFees are determined by the lender. The amount will depend on how much you have left on your loan term and how much you still owe.
BankwestBankwest Car LoanNotransparent--green-tickAn early repayment fee applies if the loan is paid off in the first 24 months.
BankSASecured Personal LoanNo$150 if paid off within first 12 months, $100 if paid off after first the first 12 months and before the end of the term. Break costs also apply as determined by BankSA.
Bendigo BankSecured Car LoanNo$20 fee for paying your loan back early.
Beyond BankSpecial Low Rate, Low Rate, Fee Free and Flexi Car Loantransparent--green-tickNo fee applies.
Commonwealth BankSecured Car LoanNoYou will be charged an early repayment adjustment if you repay your loan early.
CUAFixed Rate Car Loantransparent--green-tickNo fee applies.
EsandaEsanda Car LoanNo$50 administration fee plus $680 pro-rata for unrecovered costs of providing the loan. Break costs may also apply.
Gateway CUNew Car Loan, Car up to 5 years and over 5 yearstransparent--green-tickNo fee applies.
IMBNew Car Loan, Secured Personal Loan.transparent--green-tickNo fee applies. Loan.transparent--green-tickEarly payment fees apply.
NRMACar LoanNo$200 or 2% of the outstanding balance (whichever the greater) at the time the final payout is made. Applies in the first three-quarters of the original loan term only.
RACQNew Car Loan and Used Car LoanNotransparent--green-tick2% or minimum $200 if paid before 75% of the loan term, otherwise $0.
RACVCar LoanNoThe fee is $160 or 1.25% of your remaining loan amount, whichever is greater.
WestpacCar LoanNotransparent--green-tick$175 fee applies if you choose a term greater than 2 years, and pay it out in less than 2 years. This fee is waived if you pay out your personal loan by refinancing to another Westpac personal loan.

What else should I know about car loan repayments?

Your car loan repayments will affect how you deal with your loan, so examine them carefully. Before you send through an application, make sure you have considered:

  • How often you make repayments. Lenders usually give you the option of making repayments weekly, fortnightly or monthly. This lets you line them up with your budget.
  • The flexibility of the repayment options. Check whether you are able to make additional repayments without penalty or if there is a cap on how many additional payments you can make.
  • How you need to make repayments. Repayments are usually direct debited out of your account automatically, but you may be given other options to pay off your loan. BPAY, electronic transfer and even in-branch deposits may be available.

Making additional repayments on your loan can be a helpful option that can help you save down the track, but it's not the only feature that lenders have on offer. Remember to compare car loans across all fees, features and rates to find the right one for you.

Picture: Shutterstock

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