Ask lender about how to pay down loan

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Dear Terry,
I am upside down on my vehicle and I have no way out that makes logical sense to me. If I want to pay off the remaining balance quickly, what do I need to do to make sure the payments are being applied correctly so that I can see that it is going toward the interest?

What is the correct step to pay down a vehicle and what is the correct terminology that I need to use to communicate with the finance company?


Dear Trimika,
You have the right idea here, but what you should be paying down is the principal, not the interest. The principal is what you actually owe on the car, while the interest is what your lender is charging for the money. If you pay off the principal more quickly, you should also see a drop in your total interest payments.

Check your original loan documents to make sure there isn’t a pre-payment penalty or any prohibitions or added fees if you make additional payments to principal.

Then, call the finance company and tell them you want to make some additional payments to be applied to the loan principal amount. They should tell you how to earmark that on your monthly check so it goes where you intend.