Free preview · from the dealership side of the desk
Most people treat a car loan like a subscription: the same payment every month until it’s gone. But most US auto loans are simple-interest loans, where interest builds every day on what you owe. On a $30,000 balance at 7%, that’s about $5.75 a day. So when you pay matters, how you pay extra matters, and the balance on your statement isn’t your payoff.
The common mistake is sending extra money that the lender simply applies to next month’s payment instead of reducing what you owe. It feels like progress and does far less than you think. Below: how payments are applied, a worked example of $100 extra a month, how to pay extra the right way, payoffs and the per diem, prepayment penalties, precomputed loans and the Rule of 78s, and whether biweekly payments are worth it.
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In the full guide
- How simple interest works
- Worked example: $100 extra a month
- How to pay extra the right way
- Payoff amounts and the per diem
- Prepayment penalties
- Precomputed loans and the Rule of 78s
- Biweekly payments: useful or a gimmick?
- Your game plan
- What to say
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