What language do I have to look for to insure that I won't be penalized by paying my car loan off early?
Who are you financing through? Call and ask them.. if you do not trust them.. have them put it in writing.
I would read the contract and make sure it does not mention "the rule of 78's" or "sum of digits". These terms, I have heard, indicate a loan that would have a pre-payment penalty.
This rule has nothing to do with a pre payment penalty. ---------------------Who can tell me what the rule of 72 is?
The rule of 78 is a method of compuing interest. While it is not a prepayment penalty, per se, it almost always causes you to pay slightly more in interest then you would with a simple interest loan. On a $10,000 loan, you would end up paying about $50 more.
The rule of 72 is a rough approximation of how long it will take your money to double given a constant interest rate. It's called 72 because at 10%, money will double in 7.2 years. Ex. At 6%, 72/6 means you'll double in 12 years.
My auto loan has a penalty. If I pay off the loan in the first 18 months there is a $100.00 penalty. Of course, I don't think I'll be able to pay it off that soon anyway...lol.
