Re: Auto Finance Loan - Finance Company Not Updating My Payment Date for Advance Paym
When you are making a principle only payment or payment in addition to your monthly payment, make absolutely certain you clearly state the payment is towards the principle. If you don't they may apply it to your next months payment and that is exactly what it looks like is happening. Given your next payment isn't due until December and everything is noted as scheduled payment, it appears they have simply recieved the payments and applied them against your payments due now and in the future.
While that will provide some savings of interest owed, it doesn't help nearly as much as making a large principle only payment while continuing your regularly due payments.
i don't agree the extra principle only payment must be made with your regular payment. There is an argument to be made it should be separate as it will be processed separately and it is easier to show you were making a principle only payment if it is recorded incorrectly. Personally I use two checks to make a regular payment and a principle only payment. That way I can write in the memo section what each payment is for. It helps provide proof of what was what.
Re: Can a Lender Apply Prepayments to Interest Instead of Principal
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Kaiden
Is this something I am going to need legal aid with? I have repeatedly tried to get them to correct this and they have failed to give any logical explanation as to why this is happening other than they are looking into it and continue to encourage me to pay them in advance...
The lender has done nothing wrong. All payments get applied to interest first.
You should have been specifying that you wanted any excess applied to principle.
The way you do it is to make your regular payment with one check and include a second check marked "apply to principle" and, to be safe, attach a note to it, keeping copies of the note and the check so you have evidence of the request.
In your case, however, the majority of your $3000 payment in Feb was applied correctly to principle.
You've managed to pay off almost $6000 since January.
Word of caution.
I suggest you make payments every month regardless of what date your account says it's due.
By waiting you pile up more interest that gets paid first.
In other words, if you make your regular payment of 678.36 on 9/1 and about 150 goes to interest earned for August, then you wait until 12/1 to make another payment of 678.36, you owe about 450 from that payment for 3 months interest.
You can get an idea how amortization works by using the following calculator:
http://www.bretwhissel.net/amortization/amortize.html
Re: Can a Lender Apply Prepayments to Interest Instead of Principal
What kind of contract do you have they won't accept principle only payments? Have you read the actual loan contract to confirm their statement?
Re: Can a Lender Apply Prepayments to Interest Instead of Principal
The contract is messed up. I was in a rush and didn't read it but it pretty much says they can do whatever they want to your overpayment including not even applying it until the end of the loan. Nothing on the contract says they won't accept payments to Principal only but the agents refuse to accept it.
My post was accidently deleted.. I will repost it below.
I think I'm understanding somewhat but still somewhat confused in other areas.. what I do understand is that each payment period is separate and that each payment has a scheduled principal / interest to be deducted from that payment with interest being higher at the start of the loan and lower toward the end.
The financial institution doesn't accept payments toward principal only so I thought to keep the interest down I needed to pay in advance.
So I was aware that my overpayment would be treated as a standard payment or partial payment..
What is not adding up though, is that there were months that I was due and paid more than what was due before the period it was due (like the $900 payment) ..then I came back and paid the remaining portion of the balance the following month. So it was supposed to make that month current..
what isn't making sense is even though I have paid them full payments, for the last 4 months my next payment due date remains in December. That's 4 full payments.
Another thing that isn't making sense is that they didn't deduct hardly any interest in the beginning of the loan
Note that all of my monthly bills tell me that nothing is due currently. (Shows $0 balance)
Re: Can a Lender Apply Prepayments to Interest Instead of Principal
Nothing is due currently because they have applied your payments in excess of the current month due to the next months debt. They continue to do that which means being there is nothing due until the bank of payments has been used up.
That will result in paying less interest over all if you continue to make advance payments. If you let the bank of future payments get depleted, depending on how interest is calculated, there may be no savings at all.
For example (and let's start from payment 1 and make the due date Jan 1 for simplicity)
you make a payment of $8140.32 (12 x $768.36)
that means you will have no payment due until next year Jan 1. Since they don't apply to principal only, the apply the amount per an amortization schedule to the principal and the remainder to interest. Now, depending on how (often) they calculate interest the amount of savings overall will vary. If they calculate annually (unlikely but works for easy example) you would have no savings since you will have made the payments expected and they will have subtracted the amount of principle equal to what it would have been had you made 12 monthly payments.
Now, if they calculate daily, there will be savings since the amount paid to principle will be what is deducted from the principle when the interest is calculated each day. That means you have the savings in interest on whatever principle you paid innexcess of the expected (per an amortization schedule) each day for the next year.
The savings will be reflected at the end of the contract in fewer payments if the interest savings was great enough.
I'm not clear on what you mean that they have deducted hardly any interest at the beginning of the loan. They don't deduct interest. They pay interest from your payment. The interest owed for any particular month will vary on his interest is calculated. Not having the contract in hand I don't have that information.
If you have a regular bank account with a local bank I would suggest you ask the loan people to look at your contract and see if they can explain it to you. It would be much easier to be able to ask and answer questions that way and could give a more accurate and applicable answer knowing the specifics of your contract.
Re: Can a Lender Apply Prepayments to Interest Instead of Principal
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jk
Since they don't apply to principal only,....
Finally, someone in this thread who is using the correct spelling. It is indeed loan principal not principle. :D
Re: Can a Lender Apply Prepayments to Interest Instead of Principal
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Taxing Matters
Finally, someone in this thread who is using the correct spelling. It is indeed loan principal not principle. :D
Dang. Can't believe I got it wrong again. Especially after saving your explanation to my reference material:
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The words principal and principle seem to confuse a lot of people. Indeed, Webster’s Collegiate Dictionary, 11th Ed, remarks “Although nearly every handbook and many dictionaries warn against confusing principle and principal, many people still do.” The word principle refers to a set of rules, beliefs, doctrines, or assumptions, e.g. “the principle of disclosure is the heart of U.S. securities regulation.”
The word principal, on the other hand, has two meanings. The first refers to positions of people: “a person who has controlling authority or is in a leading position”. Id. Examples of this are a school principal, the leader in a criminal enterprise, the person who engages an agent to work on this behalf, the lead actor/actress in a play, the person primarily obligated on a debt. This use is easily remembered by something I was taught as a kid: a school principal can be your pal but a principle cannot. So where you want to use the word relating to a position of a person, think of your pal.
The second meaning is kind of related to the first: “a matter or thing of primary importance”. Id. Examples of this are the principal (base) amount of debt (as distinguished from interest), the principal (main) ingredient in a recipe, the principal (corpus) of an estate or trust, etc.
In short, principle only refers to laws, ideas, beliefs, doctrines, etc. If you want the word referring to the other meanings, you want principal.
Re: Can a Lender Apply Prepayments to Interest Instead of Principal
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adjusterjack
Dang. Can't believe I got it wrong again. Especially after saving your explanation to my reference material:
Just to say DANG even more...I originally spelled it as principal and then decided that I spelled it wrong and changed it to principle. So I feel REALLY stupid right now.