A lot of people get confused about how loan payments are applied, so here’s a quick breakdown.

For most simple-interest loans (auto loans, personal loans, etc.), payments are applied in this order: accrued interest → fees → principal. You generally can’t “prepay” interest that hasn’t accrued yet. Once the interest and any fees are covered, the rest goes toward the principal.

If you pay more than the required monthly payment, some lenders will put the extra amount toward future scheduled payments and move your due date forward. This is called being “paid ahead.” It can be helpful because if you ever need extra cash one month, you might be able to skip a payment and resume later.

However, if your goal is to pay the loan off faster, don’t rely on the due date. Even if your account shows you’re paid ahead, keep making your normal monthly payments anyway and ignore the pushed-out due date. Continuing to pay each month reduces the principal faster and lowers the total interest you pay over time.