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The lump sum of money you borrow to pay for a vehicle is the principal Ready to give principal payments a try? Learn why paying extra toward the principal on a car loan is the smart way to go.
By focusing on paying down the principal amount of your loan, you can reduce the overall cost of borrowing and shorten the length of your loan term Build equity faster if you plan to get a new vehicle when you pay off your auto financing contract, extra payments toward principal may allow you to upgrade sooner Lenders may not automatically apply extra payments to the principal, so.
In a nutshell when you get a loan, your monthly payments primarily consist of principal and interest
As a general rule, making extra payments just toward the principal balance can help you pay off a loan faster and reduce the overall cost of the loan When you reduce your principal balance, you’ll lower your outstanding debt, which could improve your score
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