Dear Terry, 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? -- MikeDear Mike, 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. Here are this week's reader questions:•Tax credit on hybrid not automatic•How can I get rid of my oversized car payment?•Can I get financing despite my low FICO score?•Do extra payments make sense?If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car -- sign up for Bankrate's new weekend Car & Money newsletter. advertisementRelated Links:7 best off-to-college carsNational auto loan averagesWhat changes auto loan rates?Related Articles:All new cars for 20105 steps to 'clunker' dealTake the 'cash back?'
Dear Terry, 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? -- Mike
Dear Mike, 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.
If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car -- sign up for Bankrate's new weekend Car & Money newsletter.
A little research could save you BIG on interest.