@Anonymous wrote:
I recently obtained an auto loan and noticed that the amount of the loan that is being reported in my credit reports is the total amount of the loan, plus all interest for the entire term of the loan. The amount of the loan is approximately $12,000 but when I look at my credit reports, the amount being reported is close to $19,000. Is this how auto loans are typically reported? Is this something that I should dispute? It seems to me that this will make my income to debt ratio way off.
Read the loan documents you signed. It sounds like you signed for the type of loan where all of the interest for the entire term is added to the loan up front and you don't start to actually pay down the principal until you have paid off most of the interest. There are different names for these type of loans (sometimes called an "add on" loan) but it is a form of the old rule of 78's loan. Look at your loan docs to see exactly what you agreed to as far as interest rate, payment, amortization, term, etc. If you have simple interest it will say so, if you don't it won't say so. These types of loans are still around, but are no longer referred to as a rule of 78's type loan. There are usually restrictions on how long a term you can take out on these loans. Sub-prime lenders use these loans all the time. Your credit report will reflect the entire amount due because it is due right from the date you sign the note - even if you pay it off early, the entire interest is due. 
OTOH, a simple interest loan will charge you interest for the outstanding balance due and when you make your payment you are paying all of the interest due at that time and some principal balance. If you make a larger payment then the scheduled payment you will pay less interest over time. If you pay off the whole balance, then the interest stops. You only owe for the interest for the time borrowed so the amount reported on your CR is the principal amount you borrowed.
@StartingOver10 wrote:
@Anonymous wrote:
I recently obtained an auto loan and noticed that the amount of the loan that is being reported in my credit reports is the total amount of the loan, plus all interest for the entire term of the loan. The amount of the loan is approximately $12,000 but when I look at my credit reports, the amount being reported is close to $19,000. Is this how auto loans are typically reported? Is this something that I should dispute? It seems to me that this will make my income to debt ratio way off.Read the loan documents you signed. It sounds like you signed for the type of loan where all of the interest for the entire term is added to the loan up front and you don't start to actually pay down the principal until you have paid off most of the interest. There are different names for these type of loans (sometimes called an "add on" loan) but it is a form of the old rule of 78's loan. Look at your loan docs to see exactly what you agreed to as far as interest rate, payment, amortization, term, etc. If you have simple interest it will say so, if you don't it won't say so. These types of loans are still around, but are no longer referred to as a rule of 78's type loan. There are usually restrictions on how long a term you can take out on these loans. Sub-prime lenders use these loans all the time. Your credit report will reflect the entire amount due because it is due right from the date you sign the note - even if you pay it off early, the entire interest is due.
OTOH, a simple interest loan will charge you interest for the outstanding balance due and when you make your payment you are paying all of the interest due at that time and some principal balance. If you make a larger payment then the scheduled payment you will pay less interest over time. If you pay off the whole balance, then the interest stops. You only owe for the interest for the time borrowed so the amount reported on your CR is the principal amount you borrowed.
+1
My Cr and my wife's CR shows exact amount of the loan that we had borrowed. This was listed as credit limit and time-to-time the owed balance decreased with payments.
@BadCredBen wrote:mine always have as well, but the purchase price of my vehicle is what showed up on my CR....
I financed a car for 18.6k and it showed on my CR for 18.6k no more no less.... and to think i am sitting at 17% apr x.x
in my case 17% doesn't seem so bad at all since mine sits at 26.99%! *sigh*
