In today's economy, many people are finding that there are definite benefits from paying off a car loan ahead of time instead of paying only monthly payments until the end of the loan. Even though car loans typically are "fixed simple interest" loans, when the debt is paid off, the borrower has one more positive on his credit history. Having fully satisfied a medium-term outstanding debt shows responsibility, integrity and planning. Pay your car loan off early after you know how to calculate your own "settlement figure," also known as "payoff value."
Write down "Total Finance Amount" (sometimes called "Total Amount Financed") from your schedule of payments.
Write down the monthly payment amount from your most recent loan coupon.
Write down the number of days since your last payment, obtained from using a calendar and the date on your most recently paid payment coupon.
Write down the estimated daily payment by dividing the monthly payment from Step 2 by the number of days in the current month. For example, if your payment were $330 per month in a 30-day month, the estimated daily payment would be $11.
Calculate the current month's payment-to-date amount by multiplying the estimated daily payment from Step 4 by the number of days since your last payment from Step 3. For example, if you paid on the 5th of the month, and today is the 10th of the month, multiply 5 (days since last payment) by 11 (estimated daily payment), yielding an estimated payment-to-date of $55.
Calculate the total principal paid by calculating the sum of the "Principal Amount" column on your schedule of payments, up to and including your most recent monthly payment (ignore "future" rows on the schedule of payments for which you have not yet paid).
Calculate the payoff value by using the following formula:
(Total Amount Financed - Total Principal Paid) + Payment-to-Date Amount.
For example, if your loan is four months old, has a Total Amount Financed of $30,000, and you've paid $300 principal per month for four months ($1,200 principal total), then your payoff value (estimated) would be:
($30,000 [Total Amount Financed] - $1,200 [Total Principal Paid]) + $55 (Payment-to-date Amt), which equals 28,800 + 55, yielding an estimated payoff value of $28,855 as of today, the 10th.
Call the institution that financed your loan, using the phone number on either the payment coupon or the schedule of payments; give them your loan number, then ask them for the exact payoff amount, after giving them the date on which you will pay off your loan.
