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How do I pay toward the principal of a car loan?
I want to pay off my car loan faster, so I decided to put money toward the principal each month. The only problem is that I’m not sure how to do it. How do I make principal-only payments toward a car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Putting money toward the principal of your
car loan
is a smart plan to get out of debt! To pay toward the principal of the loan, log onto your lender’s website and select principal-only payment or mail a check that reads principal-only payment in the memo.When you pay toward the principal each month, you’re lowering the balance of your loan. Doing so also reduces the amount of interest you pay over the life of the loan. Just make sure that your lender doesn’t have a prepayment penalty.
A
prepayment penalty
is a fee levied by lenders to ensure they get the maximum amount of profit from the loan. If you have a prepayment penalty, find out what the percentage of the penalty is and compare that to the benefits of making principal-only payments.If you’re searching for more ways to save money, you can find lower car insurance rates with the Jerry app. As a licensed broker,
Jerry
helps you find and compare quotes from over 50 top insurers, including Nationwide, Allstate, and Travelers. When you find a better rate, Jerry can help you buy your new coverage and even cancel your old policy!View full answer
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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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