Can I pay car finance off early if I have bad credit?

Having bad credit car finance doesn’t necessarily stop you from paying off a car loan early , as long as you can afford the settlement figure. Clearing the balance could even help improve your credit score over time, as it shows you’ve successfully paid off a loan.

How much will I save by paying off car finance early?

To work this out, you need to factor in your interest rate, how much you still owe, and any early repayment charges. The sooner you settle, the more likely you are to save on interest, but it’s important to factor in repayment fees to see if it’s worth it. Always ask your lender for a clear breakdown before making a decision.

Will paying off my car loan early affect my credit score?

Settling finance early won’t harm your credit score. In fact, it could have a positive impact, as it reduces your overall debt and helps show responsible borrowing. But it’s important to make sure you have enough money for any other loans and bills you have before settling your car finance. Struggling to make other payment commitments could negatively affect your credit score.

When’s the earliest I can pay off my car finance?

You can usually request a settlement figure at any point during your agreement, but it depends on your lender. Check your contract to find out the specifics of your agreement.

Can I end my finance agreement early if I’ve had a crash?

This depends on the situation. If the car is written off, your insurance payout will usually go towards settling the finance. If there’s a shortfall between the payout and what you owe, you may need to cover the difference, unless you have GAP insurance in place.

Can you pay off car finance early?

Written by Louise Haines Updated 22 Oct 2025

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If you’ve got a car on finance but your circumstances have changed, you might be wondering what your options are. What happens if you come into some extra money? Can you pay car finance off early? Often, it is possible to make an early settlement.

Settling early could have several benefits, including saving money on interest and gaining full ownership of your car sooner. But, whether you can pay off car finance early depends on your agreement type and terms.

In this guide, we’ll explain exactly what early settlement means, how it works, and the pros and cons you might want to weigh up before making a decision.

What does settling car finance early mean?

Settling car finance early is when you repay the remaining balance on your loan in one go, rather than continuing with your monthly payments. If you want to pay off car finance early, you need to request an early settlement figure from your lender. They’ll calculate the total amount you need to pay.

Your settlement figure usually includes:

The outstanding balance of your loan
Any interest due up to the settlement date
Potential early settlement fees

Once you’ve paid this settlement figure, your loan agreement is over.

HP vs PCP early settlement

Settling car finance early works slightly differently depending on whether you have a Hire Purchase (HP) or Personal Contract Purchase (PCP) agreement.

If you’re in a HP agreement, you’ll become the legal owner of the car once you settle the loan, and if there is one, pay the early settlement fee.

With a PCP deal, you’ll need to make sure the settlement includes the final balloon payment if you want to own the car outright.

If you’d prefer to hand your car back instead, you may be able to do so through voluntary termination. But this is only an option if you’ve paid at least 50% of the total amount payable, including deposit and fees. It is best to check with your lender to find out the specifics of your agreement.

How to pay off car finance early

To pay off a car loan early, the process is straightforward:

Check your agreement: First things first, look over your finance agreement to see if early settlement is allowed and whether any fees apply if you pay off your car loan early.
Request a settlement figure: Next, contact your lender and ask for a settlement figure. This will tell you exactly how much you need to pay to end your loan agreement.
Compare your options: Consider whether it makes financial sense once you have the settlement figure. You may want to ask yourself: “can I pay car finance off early within my budget now, and will it save me money in the long run?”
Pay the settlement figure: If you decide to go ahead, pay the settlement figure directly to your lender by the deadline given.
Confirm your account is closed: Once payment is made, request written confirmation that your finance agreement has ended.

Pros of paying off car finance early

There could be several advantages to choosing to pay off a car loan early:

Save on interest

One of the benefits is reducing the total amount of interest you’ll pay. By clearing the balance sooner, you avoid interest charges over the duration of your loan.

Gain full ownership sooner

Once the finance is settled, the car is officially yours (depending on agreement type). You’ll have complete control and won’t be restricted by lender rules.

Improved cash flow

No more monthly payments means more money in your pocket each month, which could free up your budget for other expenses or savings.

Cons of paying off a car loan early

While there are benefits, it’s important to also consider the potential disadvantages of paying off a car loan early too:

Early repayment fees

Some lenders may charge an early repayment fee if you clear your loan early. This could eat into the savings you expected to make, so it’s important to factor that into the total cost.

May not save much

If your agreement has a very low interest rate, the savings from settling early could be small compared to the cost of the repayment itself.

Ties up your money

Some people prefer paying monthly, even with interest on top, because using a lump sum to clear your loan means less cash available in your bank for emergencies or other things you might want to buy.

It’s important to weigh up the pros and the cons of paying off a car loan early and think about whether it's worth it for you before you make your decision.

Why choose Car Finance 247?

At Car Finance 247, we understand that everyone’s financial situation is unique. That’s why we work with a wide panel of trusted lenders who will try to find a finance option to suit your needs.

From the moment you apply and are approved in principle, you’ll be assigned a dedicated account manager to guide you through every step of the journey.

With an ‘Excellent’ Trustpilot rating, you can rest assured that you’re in safe hands from start to finish.

The takeaway

So, can you pay car finance off early? Yes, in many cases it’s possible, but it comes down to your agreement. Whether you’re looking to save money on interest, own the car sooner or simply free yourself from monthly payments, early settlement could be a good option.

But, it’s important to consider the repayment fees and the fact you’ll be paying a lot in one go. And, if you’re on a PCP agreement, remember to factor in the balloon payment if you want to keep the car, or check if voluntary termination is a better route.

Disclaimer: Car Finance 247 Limited is a broker, not a lender. Finance is subject to status and affordability checks. We cannot guarantee approval, and we do not offer financial advice. Make sure you read your agreement carefully before signing and check the terms with your lender.