If I pay more than the monthly amount due on a car loan, will that money go towards the principal?

Answered by Car Loans Expert Eric on March 25, 2021

I've got some extra money lying around and I'm trying to decide what to do with it. If I start paying more money on my car loan, will it go towards the principal only?

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Car Loans Expert

“Not necessarily. Some lenders set up their car loans so any extra money goes directly to the interest. Therefore, you should signify on your check or online payment that the extra money is for “principal only.”

To err on the side of caution and to create a paper trail, make two payments: one for your monthly car payment and one only for the principal. By doing so, you can sort the payments out for your own records, and you’ll also have documentation if you need to dispute any payments. Also, make sure that your lender doesn’t have prepayment penalties, which can render your idea of extra payments useless. “

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