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What is principal on a car loan?
I want to get a car loan, but I want to understand all the terms beforehand. So, what's the principal on a car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
It’s a great idea to educate yourself before agreeing to a
car loan
. You’d be surprised by how many people are unfamiliar with the terms of the contract and sign it anyway!The principal is the amount of money you borrowed to purchase the car, free of any interest. If you initially borrowed $26,532.00 to buy a car, that’s what your principal would be. As you make your regular payments, the remaining principal will shrink. Just keep in mind that most of your initial payments will go to interest, so the principal will take a while to decrease.
By the end of the loan, your principal should hit zero, but due to interest you will end up paying more than the initial amount you borrowed. Some lenders may allow you to make principal-only payments to shorten the life of the loan and incur less interest over time.
When you decide to pull the trigger on a car loan, you should make sure you’re covered with car insurance by using
Jerry
. As an end-to-end licensed broker, Jerry can help you compare quotes, cancel an old policy, and register for a new one. View full answer
- Gregory R.
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