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4 Benefits of Making Principal Payments
By Nicole Mayer / 06/04/2024 / Your Money
Banked a little extra money that you want to put to good use? You can apply it to the principal balance on your GM Financial retail contract without penalties or fees in MyAccount. Principal payments are applied to the original amount borrowed. This can reduce the amount you pay and the length of time you spend paying, while improving your credit and building equity.
Reduce total amount paid
When you make a principal-only payment on your simple interest contract, those funds directly reduce your outstanding principal balance. This means you’ll pay less interest on the lower principal balance and save money over the life of the contract.
Pay off your contract sooner
Depending on how quickly you pay down your principal balance, you can shorten the length of your auto financing contract. This means you'll be debt-free sooner and can budget for other expenses, add a little more to your emergency fund or invest in your future by contributing more to your 401(k).
Improve your credit score
A lot of variables go into calculating your credit score, including how much money you borrow. When you reduce your principal balance, you’ll lower your outstanding debt, which could improve your score.
Build equity faster
If you plan to get a new vehicle when you pay off your auto financing contract, extra payments toward principal may allow you to upgrade sooner.
Ready to give principal payments a try? Log in to MyAccount, navigate to the payment screen and specify how much you want to apply toward your principal. You can add on to your monthly payment or make a principal-only payment at any time. And remember, every little bit helps!
By Nicole Mayer, GM Financial
Nicole Mayer is a whisk-taker with a fondness for desserts. From baking to organizing, she’s motivated by trying new things and sharing her knowledge. When she’s not in the kitchen rocking out to ‘80s music, you’ll find her serving up aces on the tennis court.
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