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www.rivervalleyloans247.com/Most auto loans use simple interest. That means your payment amount will be the same each month, with a portion going toward paying down your principal balance and the rest to paying interest.
Unless you pay more than the required monthly payment and ask the lender to apply it to principal, the portion of your payment that goes to principal doesn’t change. The interest amount you pay each month does vary and is based on your remaining principal balance.
With this structure, a long-term loan with lower payments means you’re paying down the loan’s principal more slowly and accruing interest over a longer period of time. Extending a car loan even a year or two can significantly increase the overall amount of interest you pay.
For example, our comparison chart above shows that for a $35,000 car loan with a 9% APR, going from a 60-month loan to an 84-month loan would mean paying $3,700 more in interest.