How do I pay my car loan principal?
I heard the principal is the majority of the loan, and if I can pay off more of it, the loan will be cheaper in the long run. How do I pay down the principal?
You are right. The principal is everything you owe, not including the loan’s interest and fees.
To pay your car loan principal, you can:
- Pay frequently
- Pay more
- Ask about principal-only payments
By intentionally paying more toward your principal, you can spend less on interest in the long run and get out of your car loan faster.
Paying frequently means making more than one loan payment per month. Borrowers who go this route typically pay twice a month. You’ll need to speak with your lender to determine if this is possible and if you’ll incur any prepayment penalties by doing so.
Paying more means rounding up your once-monthly payment. Let’s say you’re spending $325 a month. If you can afford it, round up to $350. Again, ask your lender if this is allowed.
Making principal-only payments may or may not be possible depending on your lender. Your monthly payments are usually a combination of the principal and interest/fees. But you could make an additional payment here and there toward just the principal.
If you’re determined to save money on your car loan but your current lender is standing in the way, another option you have is to refinance into a better loan with a better rate.
Jerry is an app that does all of the work needed to refinance your car for you. Jerry uses your current loan information and credit score to find competitive rates from top lenders. On average, people pay $85 less every month on their car loans after refinancing.
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