How do you pay off a car early?

[darthspud]

Hey everyone!
In less then a week I should be almost completely debt free!! All I will have left is my car payment and a credit card that is up to date and only used in case of emergencies.. But what I want to do next is start paying more on my car loan but I don't want to have it go towards the interest currently the monthly payment is 244.99 but I pay an even 250 I wanted to add 50 dollars to that but I want it to actually go towards the car not the interest so I can pay it off sooner... so for those that have paid off a car early what did you do?

TIA!

Jill

 

[jerseygirl81]

I go directly to my bank which is right in my town and pay the car loan, every month I pay extra and tell them to put it towards the principal. Congrats on paying things down Linda

 

[Crystal824]

On our statement, there is a box to check if we are paying extra principal. I usually check that if I send extra. You could call and make sure it is applied correctly.

 

[Shleedogg]

Yep, ditto what PPs said. We just paid extra toward the principle. We made the extra payments online, so there must have been a box to check or that Toyota automatically applied extra towards the principle. It's a great feeling to get it done early! We paid off our car last August and just finished our DVC today!

 

[HM]

I had to pay my extra by mail, Honda wouldn't take in online since I was set up on autopay. It wasn't a big deal, I just had to find the right address (in Texas) to send the payments.

 

[Huff]

Generally anything above the normal payment would be credited towards the principal. Interest is accrued monthly so any amount you send above the interest for that month goes to principal. The only other thing some banks could do is hold the credit to apply to the following months payment rather than credit it towards the current month. While thats not common I'd check with your bank.

 

[simba20]

We didn't pay "much" extra every month, but our car payment was $378, and so every month we just rounded up and wrote the check for $380. Same with our other car loan for $347 and we would write the check for $350.

Anyway, yesterday I decided with some extra funds we had, to go ahead and pay off one of our cars. I had my bank wire the money at 3 p.m. yesterday afternoon and by 11 a.m. thi smorning FedEx was delivering the title to me.

I am so happy to have nearly $400 every month in my pocket once again.

 

[mrsklamc]

YOu can also write' apply extra to principal' in the memo line of the check. Contrary to what a prior poster said, not every bank does apply it that way automatically so you have to check.

 

[bumbershoot]

You just have to check with whatever company has the loan. Everyone does it differently.

I can pay extra principal online, but I have to pay a fee. The fee is relatively minimal, compared to our sick and wrong interest rate, but since I can also run into Chase and pay on principal for NO fee, that makes much more sense. I was making big payments online when I made the normal payments, but it turns out that those weren't being applied like I thought they were. At this point it doesn't make a big difference to the end result, but a little note: if you see your due date getting pushed back further and further and further, it's NOT being applied the way you want it to be. I don't owe anything until July, LOL...I'm making regular, LARGE, payments, hoping to be DONE by July, but it was a big sign that I missed, that the due dates were being pushed back...

Good luck and have fun!

 

[jgates]

If your loan is basically 'simple interest' you will be paying interest only to the date each payment is made. Additional amounts paid beyond that will normally go to principal.

Note!! Some 'coding' on the payment may also 'forward' the due date accordingly, so if you receive a monthly billing vs. having a preprinted coupon book on hand, you may receive a bill the next month showing you owe less. This doesn't hurt anything as long as you continue to make the minimum monthly payment (or more) each month. But if you rely on receiving that bill & prepay for a few months you may actually 'skip' a mailed bill notice and it will be up to you to remember to make that payment! If you have a coupon book - you just keep going forward as normal. So that is part of the benefit of making sure you indicate 'principal only' on the additional payment.

I don't know too many places anymore that do the old 'Rule of 78's' and normally only long term mortgage loans are 'amortized' where you are paying the interest to the same date every month no matter when you pay it.

 

[NeverlandClub23]

I just pay extra on my car payment as I normally would. Interest is accrued daily for my loan and the amount I'm paying takes care of the interest and what's left goes to principal anyways. Example, my car payment is $275, a month of interest accrued is about $60. If I pay $275 or if I pay $350, $60 goes towards the interest accrued and the rest automatically goes to principal as there's nothing else for it to "go towards" as all the interest is paid for that month. I thought all car loans worked this way .