Car note reaches 72 months next month - but still owe $$$

[llecs]

Our car loan was scheduled to be paid off next month. It is with Regional Acceptance. Our past payment history was spotty but they never marked a late on us (thank God for them). The loan did have a couple of payments that were deferred early on, but factoring in those two deferrments and assuming they are honored, we would still have to owe about $3500 by May. The $3500 would be interest, added late fees, etc.

In a situation like this, how do loan companies process the remaining balance? Do they extend the terms of the loan with the scheduled monthly payment until it is PIF? Do they mark the CRs with any negative info or remarks?

[moondog7324]

They usually are payable on demand after the contract term legth is up. You should get two additional months for the deferments. Maybe you can ask them to extend the loan for like 8 months- They should do it for you- they would be getting bonus interest on interest. Just curious- what did you buy at 72 months to have a 3500 balance, a BMW?

Do you have a copy of the original loan contract- somewhere in the itty bitty print they should address this issue. 

Message Edited by moondog7324 on 03-31-2009 02:56 PM

[llecs]

Thanks, moondog. So, lenders are cool about that? I have no problem paying it off next month, but if I could extend it then that would be great. We are buying a house later in the year and this is our only installment loan. I'm afraid that once it gets marked "closed", then our scores could drop some due to the lack of mix of credit. However, we don't want this to factor into our DTI at that time.

It is our own little BMW. It is actually a 2003 Chrysler T&C purchased for about $25k at 19.9% interest for $606 and some change for 72 months. I remember they told us our scores then were around 540 or so. Still have the estimate with our credit scores on it. Still have the contract too and will read that. It was generic and grabbed from the file cabinets at the Chrysler dealer. Our lender's name isn't even listed on it. We did so many dumb things back then come think of it. Truth be known, we didn't think about a refi until last summer, but was too late by then.

[Anonymous]

Technically speaking they cannot charge "interest on interest."  They may only accrue interest and fees, but interest and fees may not be applied to interest and fees.....this would be compounding interest.

Although your ending balance may be the  "equivalent" to the amount of interest and fees they applied due to late payments, etc. I can assure you the amount you owe is actually principle balance.

The reason:  all payments are applied first to interest and fees and only then is any amount remaining applied to principle.  So, when you are late and incurr additional interest or penalty, when you make your payment you may not make any dent in the principle depending on how much interest and fees accrued during that time.  Especially if they have a "default" interest rate, such as:  "if payment is more than X days late, interest shall accrue at <HIGHER RATE>"

So, if you "owe" $3500 at the contract balance, it is going to be principle balance, unless you still have not paid all back interest and penalties accrued.  But they should only be charging additional interest on the principle amount.

It is at the discretion of the lender if they want to extend payment terms on amounts due after contract expiration.  Most have an effective "balloon" payment due for any amount remaining at contract term expiration.

Message Edited by txjohn on 04-01-2009 04:35 AM

[itsjustmeibe]

My BF paid his last payment on his SUV last summer. On his credit report, it shows account closed and PIF. But, they are saying he owes $1,750 for late payments and an insurance lapse. It's been almost a year, he hasn't paid anything on it, and they still hold the title. Now he needs to register the car in a different state because he moved, and can't because they won't send the title to the DMV.

So to answer your question, in his case, there was no negative information reported to credit. This is GMAC.

[llecs]

Thanks guys for the input. I'm gonna gun it an PIF this month or next. I don't want this hanging over my head.

[Anonymous]

He is lucky that no neg has hit.  However, it sounds like he is going to have to settle to get title.

[Anonymous]

many people have the same problem on home loans, one day past the expected payment date here, one day here and the compound interest adds up.

[Takunda1]

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@llecs wrote:
Our car loan was scheduled to be paid off next month. It is with Regional Acceptance. Our past payment history was spotty but they never marked a late on us (thank God for them). The loan did have a couple of payments that were deferred early on, but factoring in those two deferrments and assuming they are honored, we would still have to owe about $3500 by May. The $3500 would be interest, added late fees, etc.

In a situation like this, how do loan companies process the remaining balance? Do they extend the terms of the loan with the scheduled monthly payment until it is PIF? Do they mark the CRs with any negative info or remarks?

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Where I work... if your loan matures and you have not paid it off, you are late as of the maturity date. You will be 30; 60; 90 120 then charged off. We also have the option to repo after 90 days if the loan is not paid. believe me we've repoed for as little as $2000. My suggestion.... if you have the funds to pay it off, then do so. No sense in risking negative info on your cr if you can pay this. gd luck.

[llecs]

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Takunda1 wrote:

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@llecs wrote:
Our car loan was scheduled to be paid off next month. It is with Regional Acceptance. Our past payment history was spotty but they never marked a late on us (thank God for them). The loan did have a couple of payments that were deferred early on, but factoring in those two deferrments and assuming they are honored, we would still have to owe about $3500 by May. The $3500 would be interest, added late fees, etc.

In a situation like this, how do loan companies process the remaining balance? Do they extend the terms of the loan with the scheduled monthly payment until it is PIF? Do they mark the CRs with any negative info or remarks?

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Where I work... if your loan matures and you have not paid it off, you are late as of the maturity date. You will be 30; 60; 90 120 then charged off. We also have the option to repo after 90 days if the loan is not paid. believe me we've repoed for as little as $2000. My suggestion.... if you have the funds to pay it off, then do so. No sense in risking negative info on your cr if you can pay this. gd luck.

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Your comment backs up what I was going to do anyway...PIF ASAP. I've got clean reports now and I don't want to do anything to mess it up.