I having a problem understanding how the finance work, I made a extra payment on my car and I print apply to principal on the check. When I check my account it took a portion of interest off of it. I thought it was suppose to be apply the principal and not have anything taken off. Where is a good site to go to calculate my interest if i decide to pay the car in a yr, original they have me down for 5yrs..[???1]
Does anyone here understand how loaning work
- Thread starter lizattwu
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When you finance you settle for a given Interest Rate %. Than the total amound you owe is calculated from the very beginning using that interest percentage (total figures really depend on how often interest inccurs). So for the five years you pay off that total amount (say $450 prin. + $200 interest for 5 years).
Since interest $$$ owed changes if your period in which you pay it off changes and you decide to pay off a loan in a year, you would only be charged for a year of interest. Like I did whith my previous car... took out a loan for 5 years and paid it off in 3 months. Not much interest there. I also overpaid by $.01 just to piss them off... they issued me a check for $.01![[:D]](/images/smilies/biggrin.png "Big Grin [:D]")
Also, your loan might have an early pay-off penalty. Check that.
Here is a good calculator:
http://www.instant-mortgage-calculator.com/cgi-bin/calculators.cgi?a=d
![[thumb]](/images/smilies/icon_smile_thumb.gif "Thumbs Up [thumb]")
Since interest $$$ owed changes if your period in which you pay it off changes and you decide to pay off a loan in a year, you would only be charged for a year of interest. Like I did whith my previous car... took out a loan for 5 years and paid it off in 3 months. Not much interest there. I also overpaid by $.01 just to piss them off... they issued me a check for $.01
Also, your loan might have an early pay-off penalty. Check that.
Here is a good calculator:
http://www.instant-mortgage-calculator.com/cgi-bin/calculators.cgi?a=d
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But my question here is when you put down an extra payment which suppose to be apply to principal. Do they take a portion off of it for the interest.. For example my monthly payment was 655.85 (interest taken off 37.00) and I made a extra payment of 2,300 ( they took 140.55 for interest portion) Is that right..
I always thought that's how it worked too. I know for certain that almost all mortgages work that way, I have made additional payments numerous times.
I thought car loans would work the same way, but maybe not? I have never paid a car loan off early. Check the terms of the loan, maybe you can't pay it off early and save interest, or they just screwed up and did not credit it correctly. That would not suprise me at all. Call 'em up and hassle them - it's YOUR money.
I thought car loans would work the same way, but maybe not? I have never paid a car loan off early. Check the terms of the loan, maybe you can't pay it off early and save interest, or they just screwed up and did not credit it correctly. That would not suprise me at all. Call 'em up and hassle them - it's YOUR money.
Let me make sure I understand:
You normally pay $655.85, which includes $37.00 in interest.
You paid $2955.85 and $177.55 of that was interest.
There normally would not be any interest on amount you paid above the monthly payment. I guess it is possible that you have a loan that compounds interest on a daily basis instead of monthly, or they applied a pre-payment penalty and called it interest, but most loans would have applied the entire extra $2300 to the principal.
You normally pay $655.85, which includes $37.00 in interest.
You paid $2955.85 and $177.55 of that was interest.
There normally would not be any interest on amount you paid above the monthly payment. I guess it is possible that you have a loan that compounds interest on a daily basis instead of monthly, or they applied a pre-payment penalty and called it interest, but most loans would have applied the entire extra $2300 to the principal.
That should be true, and would be true in what you, me and most of the world consider a standard loan. But the terms are whatever is in the loan contract. If the loan calls out a prepayment penalty in the fine print, it can be whatever they say, including that all payments are applied to the payment schedule, not to principle. That's why you should always read the fine print, and consult an attorney if it is not clear. Whenever I do real estate transactions (not cars), I have my attorney review the documents. It is money well spent.
If you have a simple interest loan the interest is pre-set into your repayment and you cannot "save" money on interest due to the loan already being kinda written in stone...its not compounded so they just take the original amount...add the interest and divide by number of payments
Normally loans that are 6 or 7 years long are simple interest instead of compound
If this is the case no matter how much you send in your payoff will never change....there is already a set amount you owe and thats how much you owe...period.
Call for payoff....see if there are two figures they give you payoff and total loan amount....if the latter is higher than you probably have a conventional loan (compoun interest) if there is only 1 value....your screwed...
Normally loans that are 6 or 7 years long are simple interest instead of compound
If this is the case no matter how much you send in your payoff will never change....there is already a set amount you owe and thats how much you owe...period.
Call for payoff....see if there are two figures they give you payoff and total loan amount....if the latter is higher than you probably have a conventional loan (compoun interest) if there is only 1 value....your screwed...Well I know for sure there is no penalty for paying off the loan early, they told me that the interest is fiqure daily.. I just need to call them about the extra payment .. I call my dealer and talk to the fiance guy and he say there should not be any interest portion taken off.. So I guess Ill just have to call BMw..
thanks much guys
thanks much guys
normally when you pay extra, or make an extra payment, and you want some or all of it to go to principal (amount you owe)... you must go in person and tell them. They do not read the fine print on the checks... I have plenty of examples of that. If it's a bank/credit union you can go in person, then you can tell the nice teller person "principle only please" and they must.. it's the law. If you cannot go in person, you can try doing it electronically and add a note (most on-line institutions have this add a remark) then I would follow it up with a phone call..
bottom line? you need to go in person and tell them physically.
The tellers have nothing in their books that tells them to read the little "memo" section at the bottom. Hell, once I sent a mortgage check to the cable company, and the cable company cashed it. I went straight to the bank and asked them why they cashed a check from "Local cable company" that was made out to "Jones Mortgage"..... the teller person and bank manager explained it to me very logically.... "Sir, you cannot expect our tellers to verify that the person cashing the check is the actual person it was made out to." And I replied "how silly of me, now give me all my money from your bank, you A$$"
krafty
bottom line? you need to go in person and tell them physically.
The tellers have nothing in their books that tells them to read the little "memo" section at the bottom. Hell, once I sent a mortgage check to the cable company, and the cable company cashed it. I went straight to the bank and asked them why they cashed a check from "Local cable company" that was made out to "Jones Mortgage"..... the teller person and bank manager explained it to me very logically.... "Sir, you cannot expect our tellers to verify that the person cashing the check is the actual person it was made out to." And I replied "how silly of me, now give me all my money from your bank, you A$$"
krafty
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![[rofl]](/images/smilies/icon_smile_rofl.gif "ROFL [rofl]"){kind=icon}
Here's the true scoop:
Your auto loan works like this:
Loan balance times interest rate times # of days since last payment divided by 365 = interest deducted from your payment. The balance of your payment is applied to the principal balance.
IF you want to pay your loan off faster by making extra payments, DO NOT send in a separate payment. The financial institution will simply apply the above formula, assuming you are making the next payment early. Here's an example:
You make your normal $500 payment that's due on 10/15/03. One week later, you decide you want to make an additional payment on your loan and send in a payment of $1,000. The financial institution will simply assume that you are making the 11/15/03 payment early, calculate the interest since the last payment (seven days interest) and apply the remainder to the principal balance of the loan. They DON'T care what your instructions are, because they don't know for sure that you will be making the 11/15/03 payment - so, they make sure they get their interest income first - before anything get's applied to your loan balance.
IF you want to be sure that the additional amount gets applied fully to your loan balance, your 10/15/03 payment should be for $1,500 - that way the extra $1,000 is assured of getting applied to you loan balance.
Any other manner of loan accounting is illegal - the financial institution can only charge you for money that you have borrowed.
Your auto loan works like this:
Loan balance times interest rate times # of days since last payment divided by 365 = interest deducted from your payment. The balance of your payment is applied to the principal balance.
IF you want to pay your loan off faster by making extra payments, DO NOT send in a separate payment. The financial institution will simply apply the above formula, assuming you are making the next payment early. Here's an example:
You make your normal $500 payment that's due on 10/15/03. One week later, you decide you want to make an additional payment on your loan and send in a payment of $1,000. The financial institution will simply assume that you are making the 11/15/03 payment early, calculate the interest since the last payment (seven days interest) and apply the remainder to the principal balance of the loan. They DON'T care what your instructions are, because they don't know for sure that you will be making the 11/15/03 payment - so, they make sure they get their interest income first - before anything get's applied to your loan balance.
IF you want to be sure that the additional amount gets applied fully to your loan balance, your 10/15/03 payment should be for $1,500 - that way the extra $1,000 is assured of getting applied to you loan balance.
Any other manner of loan accounting is illegal - the financial institution can only charge you for money that you have borrowed.
My bank doesn't care who the check is made out to when I deposit it. I guess it all depends on your reputation in the bank... if they know you personally for a long time the check could be made out to "Santa Clause" for all they care.
Its just like the signiture on the check... they only care who signed it if its a disputed charge.
Its just like the signiture on the check... they only care who signed it if its a disputed charge.