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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.
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Most lenders offer a “principal-only” payment option you can use to pay toward the principal of a
car loan
. This will usually be a box you can click either on a payment website or a paper statement.- If you don’t see a principal-only option, contact your lender to find out what procedures you should follow to apply extra payments toward your principal. In many cases, it’s as simple as adding a note to your payment or in the memo field on your check.
- Before you start making principal-only payments, be sure to read your loan agreements or check with your lender to see if you’ll face anyprepayment penalties. 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.
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- Gregory R.
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