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The lump sum of money you borrow to pay for a vehicle is the principal Everything you need to know about what is principal balance on a car loan, how it works, how you can try to pay it off early to save money. Learn why paying extra toward the principal on a car loan is the smart way to go.

If you make extra car payments each month, here's how to ensure they're applied to principal. 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 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

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