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How can I pay down the principal on a car loan?
I’m hoping to finish my car loan a bit early. I’d like to pay less in interest by paying down the principal sooner, but I’m not quite sure how. What’s the easiest way to pay down the principal on a car loan?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
It’s great you’re looking to pay off your
car loan
early. Most of the time, any extra payment made will go towards the principal. However, agreements vary, so you should contact your lender before making additional payments. When speaking with your lender:
- Confirm additional payments are allowed.
- Ensure the excess funds will be applied to the principal and not viewed as an early payment.
If everything checks out, the easiest way to pay down the principal is by:
- Making one large additional payment each year.
- Rounding up each payment.
- Paying half of your monthly cost every two weeks, which adds up to one extra payment per year.
Alternatively, if your lender does not allow additional payment or has costly prepayment penalties, you may want to consider modifying or
refinancing
the loan for a shorter repayment period. If you’re looking to refinance your car loan, start your search with the
Jerry
app. You can compare quotes from multiple lenders without worrying about your credit history. Avoid the hassle of researching and sending documents to potential lenders. Jerry’s app instantly connects you with top companies to find a loan that best meets your needs.View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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