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How to pay off your car loan with a credit card

How to pay off your car loan with a credit card
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Do you want to pay off your car loan with a credit card? If you have the right credit card, it might be a good idea. Here’s what you need to know.

Can you pay off your car loan with a credit card? 

Yes, if your lender allows it. It’s pretty straightforward, too – all you need to do is contact your lender and they’ll walk you through it. 

However, not all lenders let you use credit cards to repay car loans. You need to check their policies first. If you know you might want to settle early, ask potential lenders about their rules on early settlements while you’re shopping for a car loan.

Remember, too, that even if your lender accepts credit card payments, they might charge processing fees. So, you need to factor in these extra costs when you’re settling the loan.

When you might pay off your car loan with a credit card

Is it ever a good idea to use a credit card to clear a car loan? Sometimes, yes. It all depends on whether you have a 0% purchase credit card. Here’s why.

When you take out a 0% purchase credit card, you can buy something expensive and pay it off over a set period of time without incurring interest charges. This means you’ll only pay back the cost of the item. For example, if the item costs £1000, then you’ll pay back exactly £1000. so, when it comes to paying off your car loan with a credit card, it could work if, for example:

  • You get a new 0% credit card and you don’t have to pay any interest on purchases made within the first 20 months.
  • You use your credit card to pay off your car loan and then clear the balance within this 20-month period. It’s cheaper than making standard monthly car payments because you pay less interest. 

Depending on the type of credit card you have, you might have the chance to earn cash back or rewards, too. 

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Disadvantages of using a credit card

Sure, it might be a good idea to clear your car loan right now and move the balance onto a credit card. But before you reach for your card, here are some potential drawbacks to consider.

  • If you don’t clear the balance within the 0% interest period, you could end up paying far more interest in the long run. 
  • Resettlement fees can be expensive – Natwest, for example, charges the outstanding loan amount, outstanding interest, plus up to 58 days’ further interest when paying off a loan early.
  • If you run up your credit card limit, you won’t have credit available to buy other things you might need.

And, it’s always worth remembering that defaulting on credit card repayments can seriously affect your credit score. So you need to ensure you can afford the monthly repayments before buying a car. 

How to use your credit card to pay your car loan

Ready to pay off your car loan with a credit card? Here’s what to do. 

  • Check out your lender’s website for instructions on how to repay a loan early. Often, they’ll ask you to fill out a short form.   
  • Wait for the lender to get back to you with the final figure, including charges. They’ll walk you through your options for making the payment, including how to make the transfer. 
  • Make the payment with your card. You’ll get confirmation that the car loan is paid off and you’ll see the new balance on your credit card statement.  

Other ways to clear your car loan

Don’t want to pay off your car loan with a credit card? That’s fine. You can still arrange an early settlement. Here are the four most common options.

  • Refinance the car loan so you’re paying it back over a shorter period of time. Just remember that you’ll need to make higher loan repayments each month.
  • If you’ve had a windfall recently, put some of it towards your car loan. These one-off, large repayments can help you clear the loan quicker.
  • Significantly increase your loan payments. For example, you could arrange to double your monthly repayments – so, rather than paying £150 per month, you’ll be paying £300. 
  • Make small increases in the amount you repay. For example, maybe you pay £170 every month. Why not round it up to £200? Sure, it’s only £30 more, but every little helps.  

Always check with your lender before trying to clear your loan ahead of schedule, or else you could face unexpected charges or early settlement fees.  


Remember, you don’t need to settle your car loan early. All that matters is that you make your monthly repayments on time. But if you’re able to pay your car loan with a credit card, you’ll own the vehicle outright, and you won’t pay so much interest in the long run. 

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