Paying Off Car Loan Early | Principal vs Extra Payment Explained

WATCH as I show you how Paying OFF car loan EARLY principal payments works out in your favor. It is the winning equation that banks don't what you know this but it can save you thousands of dollars.

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Related Video: Should you pay off your car early?

Principal VS Monthly Payments Explained and Which is BETTER?
You have two choices when sending extra money to your lender when paying off car loan early. Principal payment or extra monthly payment. Principal payments allow you to pay off car loan early. Also, paying off car loan early, good for credit? Not always but I'd chose no payments every time. Principal payments work like this all the money goes straight to the principal balance reducing how much you owe and how much you pay in interest. Monthly payments are required per your agreement and sending extra money just pays up the loan and does nothing to you pay off your loan early or get out debt faster.

It does not matter if you have a car loan, student loan, mortgage, personal loan or some other type of auto related loan. As long as you don't have prepayment penalties and is a simple interest fixed rate loan extra money towards the principal will help you pay off your loan faster while saving you money. If the choice was paying off car loan faster vs investing, I would chose paying off the car loan. Investing is great and needed but think about how much more you could invest once you pay off your debt and become debt free.

Making extra principal payments helped me pay off my truck early, 50 months ahead of schedule and saved me thousands in interest. Give it a try this stuff really works.

Thank you for watching and be sure to share with a friend who could use this information.

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[jeffalex]

made a call to my bank right after watching this video. i had thought my extra payments were going towards principal this whole time! but the bank was just holding on to it. i had them put it towards principal, and then i came back here and hit the like button. thank you!

[TheOnlyJu]

I sent a previous loan company my full $10k bonus. They ended up not even applying it for three months until I realized it was never added. I politely called and asked why it was not added towards the Principal like I had requested. They tried giving me the run around, but I’m a Karen when it comes to corporate America. I gave them the “it’s okay I know who to call next, the Attorney General office”. Within like 3 days the balance was lowered. 😂

[VictorMartinez-dvmd]

I am 43 years old and realizing more and more how my parents failed me on topics such as these. I currently have 5 children and will be a better guide for them. It’s time we all be more proactive to end the generational curses.

[donnamariegayle]

Thank you so much. I sent $2000.00 my car payment and told them to put it towards my principal. I didn’t follow up and they didn’t do it. Telling me I don’t have to pay for the next four months. I informed them that their calls are recorded and I specifically advised that it’s a principal deposit. My account was updated. They gave me stories until I requested to speak to a supervisor, it took three days before it reflected on my account and this conversation was going on for two weeks. So watch out for them and follow up.

[manoloanleu]

The 3 people who disliked this are car dealers and banks

[griselleisara]

I owe 5, 000. On my car. Can’t wait to pay this off. Almost there 👏👏👏👏👏👏

[ntoomey]

When making your payments on the principal you MUST speak to a representative and let them know that the extra money you're paying is on the principal. Otherwise they will automatically apply towards the next payment which will still have the interest rate applied fees. Paying towards the principal will remove the interest rate fees.

[salvadorllerenas]

Bro this is the stuff we need to be taught in schools! Seriously thanks for the good look brother 🙏 you will save many people so many thousands of dollars. Seriously you’re a great person!

[thatoneginger]

Principal payments, just paid an additional 2, 000$ towards my car on top of my monthly payments, all because of this video, great help :)

[peppaminttea]

I love that you used visual examples instead of just being a talking head. Thank you!!

[brandonberg]

Bought a car for $15, 000 with 27% interest rate. I noticed after a year of payments, my balance was only $1000 less. My wife stumbled upon your video in January and started the principal payment, and now we are at 12, 000.
Thank you!

[nicolek.]

Most of us thought we were doing the right thing, being responsible and getting ahead by behaving like Mr. Extra all the while these banks have had us over a barrel, punishing us for our ignorance and sense of responsibility.
Thank you for letting us know how we can financially fight back.
I’ve been paying hundreds beyond my minimum payment every month assuming the bank was moving the extra funds to the principal. If only I knew this sooner but I’m so glad I have this knowledge now.

[foreversmoov]

I’m over here being Mr Extra smh I kept wondering why I felt like my balance BARELY EVER moved... thanks for this!

[alikayosan]

I just calculated and I basically just bought the bank another car smh, thanks for the knowledge brother

[gundeminnotlar]

When referencing corporate America, he said “They don’t really care about you as they make it seem” realest thing he said...I’ve seen & experienced it first hand in the DMV. Black ppl aren’t really respected in corporate America. Glad that he was able to get out of there and become his own boss 💪🏽 *850 tycoons repair*

[korruptcontent]

I'm going to be doing some principal payments.
I cannot have this loan on me for 72 months!

[edwardmoore]

This is something I've been doing for years. I keep my cars for a minimum of ten years and I have a strong hatred for car payments. This is why I get the maximum loan length, usually six years, and pay it off within 2 to a maximum of three years. I like the flexibility in the event some unforeseen emergency comes up like unexpected home repair.

Basically if my required payment is $225/month I send in $300+. The extra goes to the principle and overall lowers the amount of interest I pay. i make sure to designate the extra payment amount (ex. $75) is for principle.

I also do the same thing for my home. I've saved tons of money on avoided interest by doing this.

I love his analogy of equating interest to being a penalty for borrowing money.

[TheJUiCy]

Man I am so mad at myself! I’ve been paying extra for the past 4 years and just now seeing this video!! Thanks for sharing this knowledge.

[Haktendoo]

Wow 2024 and this helped. They should really teach people this in schools! They should teach real life things in schools! I can’t believe I’ve been making extra payments and I thinking it will pay off my loan faster. I’ll be making it towards the principal now. Thank you for this video!

[felesiaawang]

Had Ive known this method long time ago I would've had debts freedom. Anyways better late than never. Thanks a million.