I'm able to save money by refinancing my car loan with a lower interest rate - which is important because I have less than 20% equity in my vehicle so this isn't an option without refinancing The IRS allows me to deduct my prepayment from my taxable income each year - this means that even though I'm technically borrowing more money up front, I end up getting paid back faster which reduces how much tax I have to pay out-of-pocket over time My auto insurance premiums would go up significantly if I didn't pay off my car loan quickly enough - so by doing so now, I'm reducing both the principal balance owed as well as future payments!