A car dealer told me if I want to hurry up and pay a car off, he told me to make a car payment. If I have extra money hanging on the side make a car payment with that as well. He told me to make the extra money car payment out for "Principal Only" so I can pay off the finance interest on the car quicker. Will this lower the monthly car payment or will I still have the expensive monthly car payment amount?
2006-08-17 07:41:19 · 10 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
Paying more than the monthly payment will not change your monthly payment. It will save you money in interest and you can pay your loan earlier. The only way to lower you monthly payment will be to refinance the loan.
2006-08-17 07:47:47 · answer #1 · answered by bella_4624_19 4 · 0⤊ 0⤋
Paying extra principal on a car loan or a house loan will not lower the payment due every month. That paymant amount is specified in the contract.
It will reduce the amount that the interest is figured on every month. That will make more of your payment go to principal and the loan will be paid off sooner.
Paying extra on a credit card or other revolving credit where the payment is based on the balance due WILL reduce the payment.
2006-08-17 07:50:26 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Depends on the way the loan is structured...loan sharks that want to make money money money do not reduce your monthly payment even if you pay them extra principal each month, they reduce the term towards the end...that's the way their systems are set up and the payments calculated.
Credit unions on the other hand may have the decency to pass on the benefits of extra principal back to their member immediately from the next months payment onwards.
2006-08-17 07:48:31 · answer #3 · answered by Sanjax 2 · 0⤊ 0⤋
If you make you car payments faster, you will have lower finance charges. For example, if you get your bill today, make that car payments tomorrow. Finance charges are usually calculated with the amount of time it took you to make a payment. Also, if you want your credit score to go up, close your auto loan as soon as possible. Make extra "For Principal" payments every time you have extra money.
2006-08-17 07:50:37 · answer #4 · answered by italian_princess 2 · 0⤊ 0⤋
No, the payment will remain the same but you will pay the car off earlier by paying on the principle. Your payments are based on the base amount financed plus x% for y months. By paying an additional amount toward the principle will reduce the amount of interest accrued.
2006-08-17 07:50:14 · answer #5 · answered by Jeep Freak 1 · 0⤊ 0⤋
Your payment will remain the same until you have paid back all that you owe. If you send extra payments to the principle the payments will end sooner than scheduled and you will owe less on your car. The only way to make your payments smaller is to refinance you car after you have had it for a while and made those additional payments on it.
2006-08-17 07:47:40 · answer #6 · answered by ZCT 7 · 0⤊ 0⤋
It will not lower the monthly car payment amount, but will cut down on the amount of time you will owe on your car. Example: you may only have to pay for 52 months instead of 60.
2006-08-17 07:47:36 · answer #7 · answered by sheristeele 4 · 2⤊ 0⤋
You will still have the same monthly payment BUT you will pay the loan off faster.
2006-08-17 07:47:44 · answer #8 · answered by chief8166 2 · 0⤊ 0⤋
no, your monthly payment will still be the same. But you wont have to make as many of them.
2006-08-17 07:46:43 · answer #9 · answered by Kutekymmee 6 · 1⤊ 0⤋
It will be the same every month, you will just pay it off faster and not have to pay as much interest.
2006-08-17 07:48:14 · answer #10 · answered by tpurtygrl 5 · 0⤊ 0⤋