Overhaulin'

How do they calculate interest in your car payment from your principle balance?

I would like to pay off my car loan, however I'm confused about the principle balance and the interest rate. The loan is 36 mo's, and interest included in the payments. When I try to pay ahead they just apply it to my next car payment. On my monthly statements it's only showing the principle balance, which again is including the interest. So my question is if I pay the principle balance how much interest will still be owed on the account? Also I need to know how I go about paying just the principle balance on the account? Will this help me get lower interest? I think I might have what they call a pre computed loan. If so is there any way this can be paid off early?? I thought you were supposed to be able to save money when you pay things off.

Public Comments

1. There is an amortization schedule associated with your loan. Each payment consists of interest and principal and the principal increases each payment. If you send extra cash in, you need to tell the creditor that it is to pay down the principal balance. This will not change your payment amount but it will shorten your loan and decrease the amount of interest you pay. This is common with mortgages. HOWEVER, not all retail loans allow this. When the loan was made, the lender calculated how much profit it was going to make and even if you want to pay off the loan earlier, they will not let you. Correction, they will let you but will charge you the same amount of interest no matter what. If this is the kind of loan you have, it is not worth paying it off early.