Why is the balance of my car loan barely moving?

I've paid my first three months on my car loan, but the balance is barely moving. What gives?

Answer
Everyone knows the frustration of a barely moving car loan balance after first opening a loan. But have faith! It’ll start dropping over time.
A car loan balance barely moves in the first few months because any type of installment loan is front-loaded with interest. This means that you’re paying interest on the total balance of your loan at the current moment. The higher the balance is, the more you pay toward interest and the less you pay toward the balance.
The longer you go into the loan, the more money goes toward the principal rather than interest. Over time, you’ll see your balance go down exponentially compared to the first few months. Just have patience, keep paying on time, and you’ll see results.
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Eric Schad
Answered on Nov 15, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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