Volvo Auto Finance 101: How To Avoid Prepay Penalties

Knowing every aspect of the loan contract you’ve signed at our Volvo auto finance center is vital if you want to avoid penalties or fees. One common clause put into loan agreements is a prepayment clause, which normally applies when you pay your vehicle off too early. To learn more about prepayment penalties, visit us at Volvo Cars Gilbert today.

What Are Prepay Penalties?

When you sign a contract for an auto loan, there are several unique clauses to look out for. One of these clauses is a prepayment clause that indicates a penalty if you attempt to pay too much for your vehicle or if you pay it off too early. Since most lenders use a precomputed interest rate, you’ll pay off most of the interest at the beginning of your loan.

The average prepay penalty to expect is around two percent of your outstanding balance. Prepay penalties are not part of every loan contract, so it’s important to discuss these details with our financial team to be fully informed of what you may owe. Only certain states allow prepay penalty clauses in auto contracts.

How to Avoid Prepay Penalties

If there’s a prepay penalty as part of your current auto loan, the most important thing to do is read all aspects of the contract. Once you know all of the details of your contract, it’s time to do some math and figure out how much you would potentially owe if you paid off your vehicle early. In some scenarios, it might be cheaper for you to continue through the contract and avoid paying any additional penalties.

You can also negotiate before buying a new Volvo vehicle to find preferential terms that don’t include a prepayment clause. The total agreement might be more expensive overall, but if you think you might want to pay off the deal early, the trade-off is worth it.

Visit Volvo Cars Gilbert to Learn More About Auto Loan Contracts

If you have any further questions concerning the auto loan process, contact our Gilbert, AZ, Volvo dealership today. Once you’re ready, be sure to view our selection of Volvo new car specials to see if any apply to the vehicle you’re considering. Give us a call or stop by to get started!