Does this mean by paying off my loan faster than the stated length, that the total amount paid is reduced as well? From my loan providers faq:
1. How is my payment divided between principal and finance charges?
In accordance with applicable law. If there is no applicable law, payments are applied first to finance charges and then to other amounts owed, including late charges, principal, and other fees.
Remember, as the principal balance is reduced, the daily per diem also decreases. So, as long as the principal balance is reduced with each payment, the amount of finance charges that accrue daily decreases too. That's why the amount of finance charges paid at the beginning of a contract is higher than the amount paid at the end.
As long as you have a simple interest loan which almost are all...
The more you pay each month, the less you will pay total since the interest is calculated on the balance not the original loan amount.
The more you pay in the beginning of the loan the less you will pay total (compound interest).
example: If you doubled your car payment every month, your car would be paid off in much less than 1/2 the time.
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