I've never really know what I should do on this, and I'm starting this month to put extra on it to pay it off earlier, what would be more effective? Thanks!
2007-10-04 04:23:19 · 5 answers · asked by ASH 6 in Business & Finance ➔ Personal Finance
it actuallly asks me what I want to apply it to when I fill in extra money. I have ALWAYS paid at least the minimum and have never been late on it.....sounds like principle is the way to go tho.... :)
2007-10-04 05:08:57 · update #1
Do not pay the interest!!!!! That is just wasting your money and your bank is just getting free money. The principle is your actual loan money you applied for so pay that off. If you do it that way, you won't have to pay as much interest and you will pay your loan off a lot sooner.
2007-10-04 04:50:01 · answer #1 · answered by AnGeL 2 · 1⤊ 1⤋
If it's a normal car loan and you didn't do a prepaid interest type loan, the bank will first pay the interest accumalated, then the remaining amount will be applied to principle. Most car loans are written this way. Interest and any fees are paid first, the rest is to principle. So as long as you have been paying the minimum and are current, anything you pay extra will be paid towards the principle.
In simple words, you don't really get to choose. The bank will first pay the interest, the remaining will go towards principle.
2007-10-04 11:39:33 · answer #2 · answered by bettabass 3 · 0⤊ 0⤋
apply the extra money to the principle. You should do this to lower the amount of interest that is compounded on the principle. You will pay off the car much faster this way than jus paying extra payments.
2007-10-04 11:28:05 · answer #3 · answered by rurouni33569 4 · 1⤊ 0⤋
It is not so much your choice. It works as follows:
When you start paying more on your car payments ( which is a good idea), your subsequent required minimum payment will be smaller. And as you keep doing this, you will automatically but slowly be reducing your balance and the interest portion of the payment and towards the end this speeds up and you will have your loan paid off earlier.
Good luck,
Barry
2007-10-04 11:36:07 · answer #4 · answered by Anonymous · 1⤊ 0⤋
You should always payoff principle, not interest. Interest is simply profit for the bank. Principle is what your monthly interest is based on.
2007-10-04 11:30:36 · answer #5 · answered by Jay P 7 · 2⤊ 1⤋