How to Negotiate Your Car Pay Off

How to Negotiate Your Car Pay Off
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Paying off your car loan early is the right financial move, if you can afford it, or if you're having trouble making payoffs, advises the Consumer Financial Protection Bureau. Every month you make a car payment, you are actually paying interest.

For some car loans, by the time you make your last payment, you have likely spend hundreds or even thousands of extra dollars just in interest that was not factored into the original price of the loan. Because of this, you should try to negotiate the best terms for your car pay off as soon as you are able to.

Check Your Loan Terms

If you aren't sure exactly what t type of car loan you have, get your paperwork so you can better understand what you need to do in your car loan negotiation. There are two basic types of vehicle loans.

A simple interest car loan requires that you pay interest as you go along, while a pre-computed interest loan has the interest built into each of your payments. You will save more money paying off a simple interest loan early.

Decide What You Want

Why are you paying off your car loan early? Do you want to reduce your interest payments? Do you want to get a new car or lease a vehicle?

Figure out exactly what you want from your car pay off. This will help you negotiate. For example, you may want to pay off the principle of your car loan minus all interest you would have paid. This is the standard negotiation procedure for simple interest loans.

A pre-computed interest loan can get a little more complicated. You will likely still have to pay some of the interest, but you can try to negotiate for a lower amount or a percentage of what’s left in your loan.

Contact Your Lender

Your lender has experience with early payoffs and will have a set process for getting the process completed. Contact the lender directly to start the negotiation process, making sure you have your paperwork handy for quick reference. Each lender has a different way he prefers to communicate.

For example, you may need to make all correspondence through the mail, or you may be able to do it over the phone or the lender may prefer all communication to be in person. Find out all the details during this initial contact. You'll also want to learn if there are fees involved, cautions the Consumer Financial Protection Bureau.

Consider a Counter Offer

Your loan officer might be restricted to following her company's set policies regarding paying off loans, but she might have some flexibility. Keep the negotiation going. This is especially important if you’re communicating through the mail.

Don’t let the lender go more than a few weeks without hearing from you. Stress that you want to pay off your loan early and what your terms are. Ask that your case be made a priority and always mark a deadline for hearing from the lender to help move it through the system.

Finalize the Payoff

Once you have your final agreement set, get your final car pay off terms in writing and make sure both you and the lender sign them. This is very important to prove that you no longer owe the lender any money for your car loan. Once the loan is paid off, you should receive a title for your car.

Expect to receive the title of your car in the mail after paying your car loan off. When you negotiate the pay off, be sure the lender has your correct mailing address. The title makes you the official owner of your car.