Congrats—you've finally paid off your vehicle. Now what? After you've repaid your car loan, there are some actions you need to take, including checking for insurance savings, checking your credit scores and putting your savings toward a brand new goal.
Check Your Credit Report
It may seem counterintuitive, but credit ratings can occasionally decrease when you repay financing. Checking your credit history provides you with a concept of what's going on with your scores, as well as provide you with the chance to make certain all of your car loan details are accurate.
If your credit scores transpired because of paying down the borrowed funds, it might have happened a couple of reasons:
- It was your main account having a low balance. If all your other credit accounts carry high balances, paying down your car loan could negatively impact your scores.
- It was your main installment account. Credit mix is really a factor in your credit scores, and if you repaid your main installment loan when you paid off your vehicle, this could cause your scores to drop.
There are many some other reasons (unrelated to paying down your car) your score could have been down, and checking your credit reports should assist you to realise why. You can get a free credit report from Experian to see what's in your file.
Get Your Car Title
You just repaid your car and own it outright—now obtain the paperwork that says so. Your vehicle title is a piece of paper that lists the state owner and then any lien holders on your car. Depending on what state you live in, you may curently have a title with your name onto it. If you do, you reside in what's called a non-title-holding state, which means your state's Department of Motor Vehicles issues the title towards the vehicle owner and not the lien holder. Within this scenario the lien holder shows up around the title, however is not the primary name.
If you reside in one of these states and just finished paying your vehicle loan, you will want to take away the lien holder out of your title. This can be done by contacting your state's DMV.
If you reside in a title-holding state, this means that the lien holder—the lender that financed your loan—will hold the title and it will only be released when the lien continues to be fully satisfied. Once you've repaid the loan, your lien ought to be satisfied and also the lien holder should send you the title or perhaps a release document inside a reasonable period of time.
Once you receive either of these documents, follow your state's protocol for transferring the title to your name. This will permit you to show ownership and sell the vehicle later on, so get all this paperwork so as as soon as possible.
Look Into Different Insurance Coverage Options
One advantage of paying off your car loan is perhaps you can be capable of getting a much better rate on your auto insurance. First, notify your insurance provider that you've repaid the borrowed funds to allow them to take away the other lien holder (lender) out of your policy.
Lenders often require that you carry a minimum degree of insurance so that if any damage were to occur, their collateral and investment (the car) would be sufficiently protected. When your car is paid entirely, there aren't any longer lien holders and you may be able to contact your insurance provider to ascertain if it can reduce your coverage or offer you a rate plan.
Consider Saving the Extra Funds
Another benefit of paying off the loan is that now you can make use of the money you place toward your vehicle payment for other things. This is a great opportunity to save or invest, as is available already proven you can function with no extra money.
Of course, how you make use of this money will depend on your financial situation: You may have other debt you need to pay off or want to use the extra money for other necessities. If you can afford to save these funds every month, however, you could use it to develop general savings, put more toward your 401(k) retirement plan, add some extra funds for your child's college savings plan, pay more principal on your mortgage each month or put aside the additional funds for a vacation.
You may also consider investing the additional money in securities, for example stocks and bonds, that could offer higher yields than a savings account with time. You can purchase a Roth IRA or a traditional-ira if you want to increase your retirement funds; make use of a financial advisor or “robo-advisor” (digital financial advisor); or get your own stocks, bonds or mutual funds through a brokerage account. See “How to Start Investing” to learn more.
No matter whether you begin in order to save, invest or utilize the extra money for something else, you could have reassurance that you simply successfully repaid your loan and therefore are the sole owner of your vehicle.