Can I just pay the principal on a car loan?

I want to pay off my loan faster and reduce my interest rate. Can I make payments that go towards the principal of a car loan?

Answer
Great question! Yes, you can pay the principal on your car loan, but only as an extra payment.
A typical loan payment is any interest and fees the loan has accrued, along with a portion of the principal.
By making extra payments, the extra payment amount would go towards your principal, meaning you could pay your loan off faster. That said, not all lenders will accept principal-only payments.
If your lender allows principal payments, be sure to tell them the payment is for your principal balance. If you don’t, they could apply it to your monthly payment instead.
You’ll also want to check with your lender about prepayment penalties. Some lenders charge additional fees if you pay off your loan early, so you’ll want to find out before making additional payments.
If your financial situation has changed since you took out your last auto loan, you may also want to consider refinancing. Download the Jerry app to see if refinancing your car loan can save you hundreds of dollars per month and help you pay your loan off faster.
Phoebe Mah
Answered on Nov 22, 2021
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