To make sure you reap the benefits of paying extra on your car loan, you need to ensure that:
Just paying extra won’t lead to money savings unless you direct your payments toward your principal. Be sure to talk with your lender about their process for accepting principal-only payments.
This is also when you should ask your lender about prepayment penalties—fees levied by a lender to offset the loss in interest if you pay your loan off early. These fees can vary, but in some cases, they’re high enough to negate the advantages of paying extra toward your loan.
In most cases, paying extra is a financially savvy move that doesn’t have to break the bank. Some simple ways to pay extra money toward your car include: