I just bought a car this week. I have a five-year loan and would like to know if paying extra on my monthly payments each month will do any real good at reducing how much I pay in interest over the life of the loan?
Check your loan agreement to see whether there are any specific terms about paying down the principal. Some loans stipulate that extra payments will first be applied to the interest, while others allow extra payments to principal without penalty. If any extra payments go to the interest first, you’re better off saving the money until you can pay off the balance all at once.
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