What happens if I pay extra on my car loan?

I want to put more money toward my car loan to pay it off early, but I’m not sure if I can. What happens when you pay extra on your car loan?

Sarah Gray · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
If you pay extra toward your
car loan
, the principal of the loan goes down more quickly. This translates into
paying less interest
overall in the long run and, as you said,
paying off your loan early
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:
  • Doubling up on your payments each month
  • Rounding your monthly payments to the next $100
  • Making several lump-sum payments throughout the year
View full answer 
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.

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