paying extra on car payment?

Question

if i am paying an extra $3,000 on my car payment should i have them apply it to the principal or interest?

Answer 1

Obviously, against the principal debt. If you're paying it in one extra payment be sure that you make it an entirely separate payment and mark all over the payment voucher (or make your own paperwork) that this payment is to be specifically applied to the principal amount owed. Don't neglect your regularly scheduled payment voucher as well. I've heard too many stories about oversights by companies when things aren't clearly spelled out. You might also request an updated projected payment schedule to see what your savings may be compared to the original schedule (how much interest you've saved if you don't make any additional balloon principal payments).

Answer 2

Yes, I do this as often as I can. I've paid as much as 3 or 4 extra payments in a given month. I do this because when I apply extra money towards the principle, it lowers the car loan balance plus I do not have to pay as much interest than if I paid the minimum. The thing is, your car loan APR is a really good rate, to the point that you get higher interest with your ING account. I think you should split the excess 50/50, putting 50% of it in savings, and 50% towards your car loan. It is good to pay off the car loan because you will save interest plus your credit score will be boosted when there is a smaller balance on the loan versus the original balance; however, if you have a very low interest rate, sometimes it's not worth it to pay it off right away because the interest accumulated on say, a 1.9% APR loan is really not that much(in proportion to the payments). However, if you have a subprime interest rate(my friend has 21% on his used car!), pay it off as soon as you can!! Your interest rate is good, but still higher than )% or 1.9%, so that's why I say to split the excess money for payments between your savings account and paying down the car loan.

Answer 3

In accordance to law, any payment you make over and above the monthly payment, is required to be applied to the remaining principal by the lender. This will in turn affect your future interest payments by lowering the interest and will therefore cause your loan to be paid off quicker. For example, say that you just started your loan and this will be your first loan payment. Say that your car loan payment will be $310 per month and assume that the entire payment is interest. If you make a payment for $310.50, then the $310 is applied towards the interest, and the remaining 50 cents is applied towards your principal. If you continue to pay an additional 50 cents each month, that extra 50 cents each month will be applied towards the principal.

Answer 4

Check with your loan papers or lender first, but on most auto loans the principal and interest amounts are already determined, so that regardless of whether or not you pay anything in advance, you still have to pay back the full principal and interest amount originally signed for. As well, you still need to keep making the monthly on time.

If you have one of the other types of auto loans (fewer of these out there) then paying down the principal could reduce your overall cost of the loan in saved interest. Paying down the interest does virtually nothing to your benefit

Answer 5

Principal.

Answer 6

it will reduce the principal. If you keep paying extra, you will reduce the amount of interest that you pay over the course of the loan. Pay it off early and save!

Answer 7

Principal - why are you paying extra? Use your interest rate to determine if you are coming out ahead by spending that extra money.

Answer 8

After the finance charges are paid for the month, anything extra automatically goes to the principal balance. You don't have any choice.

Answer 9

I believe applying to principal will lower amount in interest paid. Assuming they do it that way. I know you can for a house.

Answer 10

Apply it to principal to pay off the loan early.
Check to see if there is any penalty for early payoff.