If you pay your car loan a month or two in advance, does the loan still compound interest?
Yes, but I believe it's still the case that any payment beyond the monthly due will go 100% toward the principal of the loan. But to answer your question, yes.
The terms of a car loan can be a little funky - some are written where more interest accrues in the earlier part of the loan than on a traditional fully amortized loan.
But generally, yes, interest continues to accrue on the remaining principal. The more you pay down, though, the less remaining principal outstanding, and the quicker you'll pay off the loan.
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