Pay Down of Auto Loan

In this financial climate having any kind of extra money makes you wonder what the smart thing to do with it would be. First you will want to pay off any high interest credit cards or loans. One of those loans are usually an auto loan, which might not have terribly high rates, but they will probably be higher than your mortgage.

When paying down a car loan, you will want to speak with your lender and make sure that there is no kind of prepay penalty for you. You want to pay it off, but you don’t want to be penalized for having done so.

Then you want to make sure that the extra money that you are sending is going directly to the principle of the auto loan. As you pay down the principle, the interest will be less as you are borrowing less money.

The more you send them on your auto loan, the less you will see payment wise. The interest is based on the amount that you have borrowed and if you have borrowed less than what you were scheduled to pay back, your payments may go down. Talk to your lender and see how they will handle extra payments on the auto loan.

The auto loan financier will tell you how to mark your payment so that it is registered as a principle only payment instead of a monthly payment. Talk to them before you do anything.



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