We're the Consumer Financial Protection Bureau (CFPB), a U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.
Whether you can pay off your auto loan early without a penalty depends on your contract and on your state’s law.
If the lender wants to charge you a penalty or fee to pay off the loan early, the contract has to contain a prepayment penalty clause. Review your Truth in Lending disclosures and the contract before you sign the agreement. These documents will tell you whether there is a penalty for paying early. You should also ask your lender, or the dealer if you are getting dealer-financing, if there is a prepayment penalty. If there is, you can negotiate to have the penalty removed from the contract or ask for a different loan.
Why it matters: If your loan has a high interest rate, you may later be able to refinance at a lower interest rate and payment. When you refinance, you prepay the original loan in full. Ask your bank, credit union, or other lender about interest rates.
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