What should I expect to happen during/after car loan payoff?

[Tamarind]

I have been carrying a 2.5% loan for my first car purchase. Thanks to the Bogleheads by jumpstarting the way I think about debt! I realized that just because I was given cash by the dealer greater than the amount of interest on the loan......doesn't mean I actually have to keep the loan for the full term.

I'm getting ready to pay off the loan but this is the first loan I've finished with so I'm not sure what to expect. According to the website (Hyundai Finance) which gave me my payoff quote, I actually have to mail them a check in order to finish the deal? Seems somewhat old-fashioned. Could those of you who've been-there-done-that let me know about your experience?

1) Can I make a large principal payment via ACH first, then get a new payoff quote, so I'm not sending them a 4-digit check through the mail?

2) Then I just send them the check? They give an address but no other instructions...

3) What communication should I expect from the lender after they get the payoff check? Should I receive any documents?

[retiredjg]

I've done this a few times in the last couple of years. I get the payoff amount and send a check through my bill pay with the account number on the line at the bottom. A little while later, the title shows up in the mail. Pretty fast and simple.

[Andyrunner]

You should receive a lien release that you need to attach to your title for when you decide to sell it. You can pay for a new title that doesn't have the lien on it, but from what I understand attaching the lien release is just as good. This might vary depending on your state.

[pshonore]

You should receive a lien release that you need to attach to your title for when you decide to sell it. You can pay for a new title that doesn't have the lien on it, but from what I understand attaching the lien release is just as good. This might vary depending on your state.

My experience has been the finance company holds the title. When you pay it off, you get the title with a signature on it releasing the lien

[tim1999]

Send a check and you'll get the title free of the lien some time later. Don't freak out if it takes a while.

[jimb_fromATL]

I'm a big fan of NOT borrowing money, and my last car loan was in 1980. But at today's low rates, I'm not sure it will save enough interest to make it worth giving up the lump sum of cash.

Nowadays there are often better places to put the extra money. This is especially true if you're not maxing all available tax-deferred or tax-advantaged retirement investment options such as a 401(k) or IRA. If you can invest the money in any tax-advantaged account, chances are the extra compound interest that it will earn over the rest of your life will be a lot more than the interest the after-tax money will save on the relatively short-term car loan.

ARE you contributing the max to any available employer sponsored retirement plans?
Is your income in range to allow either a tax-deferred IRA or Roth IRA?
...for you and your spouse -- if married?

Where is the extra money now?

• It would be a bad idea to take it from any tax-advantage account. And you'd need to look closely at any cap gains tax and loss of compound interest earnings if you were to take it from a taxable investment account.

Will it reduce your liquid assets for emergencies to any less than at least 6 months to a year of living expenses?

• It could be a bad idea to tie up your emergency funds in a "depreciating asset" where you would not be able to get the money if you needed it because of an unexpected financial setback.

How much is the current balance, and what is the payment per month?

jimb

[CAsage]

When you make an ACH payment, are you able to specify extra amounts to principal? Have you tried this before, and do you have online statements that show it was credited correctly? The only concern I would have in paying the entire balance via ACH is that they incorrectly credit you NN payments ahead, instead of paying the darn thing off. Sometimes installment loans (i.e. specific term payment loans) have to be paid off via a different method.... You might want to either test this with a bigger payment or call. Sending a check to a specific address is not a risky thing (I mail mortgage checks because I change the principal $$ every month).

[Tamarind]

Send a check and you'll get the title free of the lien some time later. Don't freak out if it takes a while.

Thanks, this is precisely what I needed.

[Tamarind]

I'm a big fan of NOT borrowing money, and my last car loan was in 1980. But at today's low rates, I'm not sure it will save enough interest to make it worth giving up the lump sum of cash.

Probably true. I honestly just want to be rid of the thing.

ARE you contributing the max to any available employer sponsored retirement plans?
Is your income in range to allow either a tax-deferred IRA or Roth IRA?
...for you and your spouse -- if married?

Partner and I (not yet married) each have more than 6 months of emergency funds (she has a year, I have 7 months). We each save 30% of gross in tax-advantaged accounts (401k, Roth, and HSA), without yet maxing out all tax advantaged accounts (we both have some space left in 401ks). If we maxed everything we'd be saving 46% of current gross. We'll likely get there in the next couple of years. I have been saving an additional $500 monthly in high yield savings for near term expenses (wedding party, vacation, house maintenance), and that's where this money will come from.

Will it reduce your liquid assets for emergencies to any less than at least 6 months to a year of living expenses?

How much is the current balance, and what is the payment per month?

No, will still have more than 6 months of expenses in liquid assets. Current balance is $5100 with monthly payment $295 and a bit more than 2 years left on the loan.

I appreciate you putting it into context with the compounded interest on investments. I agree it's probably not the optimal use of the money to save a few hundred in interest, but it feels good to be able to get rid of the debt and tidy up my finances before marrying as it will leave only the mortgage (9 years to go).

[cherijoh]

I have been carrying a 2.5% loan for my first car purchase. Thanks to the Bogleheads by jumpstarting the way I think about debt! I realized that just because I was given cash by the dealer greater than the amount of interest on the loan......doesn't mean I actually have to keep the loan for the full term.

I'm getting ready to pay off the loan but this is the first loan I've finished with so I'm not sure what to expect. According to the website (Hyundai Finance) which gave me my payoff quote, I actually have to mail them a check in order to finish the deal? Seems somewhat old-fashioned. Could those of you who've been-there-done-that let me know about your experience?

1) Can I make a large principal payment via ACH first, then get a new payoff quote, so I'm not sending them a 4-digit check through the mail?

2) Then I just send them the check? They give an address but no other instructions...

3) What communication should I expect from the lender after they get the payoff check? Should I receive any documents?

The last car loan I had (a long time ago) was through my credit union, so I visited a branch, got the payoff and made an immediate transfer. As others have noted, they sent me the title in the mail.

[mmmodem]

I had a Hyundai car loan back in 2009. I was 3 months shy of buying the car with cash before my old car had to go to my aunt. So three months later, I paid off the whole thing online. There was a payoff amount quoted online with increasing amounts depending on the day the transaction took place. A few weeks later I get the title and a small check for overpayment in interest. Not sure why they would revert to snail mail and a physical check.

[Lafder]

A check or cashier's check is standard operating procedure for car and home loan payoffs, mailed to a different address than the usual payments.

Yes you can pay ahead online, then the final payoff will be less. But I would not worry about a check being lost in the mail since it can always be reissued.

And yes, within weeks of sending the check I got the original title with loan payoff noted, via regular uncertified mail.

lafder

[JasonA1987]

I paid off two in the last couple of months. What everyone else said is correct; you will just mail a check and they will send you the title.

On the title will be a signature from the lien holder releasing the lien. You should go get a new title reissued under your name for the simple reason of if you lose the title. If it has the loan companies name on it, you have to go through them to get the title replaced. If it is under your name, you can get a new title issued at the county clerks office in a few minutes. A new title here costs $5.

[MilleniumBuc]

Send a check and you'll get the title free of the lien some time later. Don't freak out if it takes a while.

Thanks, this is precisely what I needed.

You could also get a letter telling you that the title is electronic and they have transferred it to you within the state system. This happened to me in FL 2 months ago. No title to keep track off.

[Capsu78]

Don't forget to visit with your auto insurance company to let them know you are now the titled owner and update your policy accordingly. This makes it easier to file a claim should you need to.