Extra payments can save interest because they reduce the principal balance faster. Since interest is usually calculated from the remaining balance, a lower balance means less future interest.
Small extra payments can matter
Even an extra $25, $50, or $100 per month can shorten the loan if the lender applies the extra amount to principal.
Make sure it goes to principal
Some lenders may apply extra money differently unless you specify that it should go toward principal. Check your lender's payment settings before relying on an extra-payment plan.
High-rate debt first
Extra payments usually have the biggest impact on loans with higher interest rates. If you have multiple debts, comparing interest rates can help you decide where extra money may do the most work.
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