Hi Experts,

I have a car loan taken at 8.4% 5 months back... Suggest me the best possible method:

1. To close off the loan by paying the balance amount (I guess, I just need to pay the principal alone, correct? Do they charge anything extra? )

2. Or, to renegotiate for a lesser rate - with the same bank or a diff bank?

Suggest me a suitable path forward, as I am really confused with what to do?

Looking forward to your valuable advise,

Thanks in advance,
Shiv.

Either is better than paying high interst rates.

You need to read your loan paper and/or talk to the bank about any early pay off charges.

I agree with Fr_Chuck about finding out if there are any early payoff fees... If there is, it may be the fee is only on the final payment. If that is the case, I would pay off all except for a hundred dollars, then pay off the hundred dollars perhaps the next month if possible. By doing that, the penalty would only be a percentage of the last payment... if your contract is written in those terms.

Some banks don't have any early pay off penalties, so you'll want to check into that.

If you have the cash, you have a great option of paying it off and not owing interest. You also have more leverage with the bank to refinance at a lower rate.

Another thing to watch out for is loan origination fees or closing costs that might be added in if you refinance... try to find a bank that will not charge those fees if you can.

With interest rates being what they are on deposits, you are better off paying off the loan rather than incurring the interest charges you are currently paying, assuming there are no early pay penalties.

If you are interested in refinancing still, be aware that while the prime rate is down, most banks have taken huge losses on loans and are a bit risk adverse right now. As such, the rates charged on loans are trending up.