Approved w Horrendous credit but excellent income

[julieray419]

Hi everyone,

life finally bounced back and I finally got a job. Anyway, we had to buy a car recently because hubbys was dying. Thankfully our CU approved us with the condition of 20% down and we chose to not finance more that 10K and no longer than 36 months. Our income is so much better but our credit is trashed due to job loss and legal costs in a divorce that luckily never panned out.

So the bank is financing $8500 for 36 mos, at 14% with a monthly payment of $245 taken out in semi monthly installments when my direct deposit hits my account.

My question to you all is, if I make it a habit to pay the second half when the first payment is drafted, does that mean I save on interest? I want to know what is the best way to overcome that super high interest rate.

We can afford to pay 2 times the amount of our monthly payment but as others asked, if I am trying to rebuild credit, what is the best way to handle this?

[JayRizzo]

Send them as separate payments to avoid confusion.  If it's my own CU, I would walk into the lobby and perform the transaction.  Also, write on the check/money order and coupon, "Apply Payment To Principle".  Even with simple interest terms, your statement on the draft instructs them to apply the full funds toward your principle only.  Each month, your principle goes down which automatically reduce your interest rate.  I don't believe CUs penalize you for multiple payments per month -- some of the bigger auto finance companies started penalizing its customers for early payments all for the sake of making a buck (sick).

1) It brings your Installament balance down quickly

2) Looks good on the report and in the eyes of the CU for future financing or other products

Keep your eyes on those automatic withdrawals.  Sometimes there's a slight offset in dates, not exactly 30-days and you don't want your payment to be late all of a sudden.

Oh, and Congratulatons on the new job!!!

[Anonymous]

car loans are simple interest loans.

paying more, paying early, paying faster all lowers your amortized interest and makes the loan go down faster.