I saw a video explaining that principle payments helps save money by paying less interest and paying off your loan faster but I’m still confused as to how.
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Others have provided good explanations.
Another way to look at the total cost of the loan is: multiply the monthly payment times the total required payments, and then subtract the original loan amount (ex. $10,000 loan for 24 months, $450/month payment would mean that you will pay $10,800 to borrow $10,000; you could reduce the $800 cost by reducing the principle – the sooner in the loan term you reduce the principle, the more you save because the interest is calculated monthly on the existing principle)
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