Car loans typically use a simple-interest format, meaning that the interest you owe on the payment date is based on the principal on that same day. However, the amount going toward your principal changes every month because a simple-interest car loan is amortized. This essentially means that as you pay off your loan, the principal goes down, and the interest you pay is based on this principal.

For example, your very first car loan payment will also have the highest interest payment because your principal is at its highest (this is also known as a front-loaded loan). Each month, more money will go toward the principal and less toward interest until you completely pay the principal off.

To help you save money to pay off your principal make sure you are getting the best deal on your car insurance. You can do this with the Jerry app.

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