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Member
pinned388
Posts: 13
Registered: ‎09-20-2012
0

Principal ONLY Payments Question...

Heres some basic loan info to begin with:

 

72 month auto loan

18% interest

Loan amount $17,247 (current balance $16,063)

Monthly payment $393

Opened loan Oct 2012 & paid 3 payments so far.

 

 

Okay I called the bank today just to find out the payoff amount and during the 45 minute phone call I learned that I can make principal only payments every month for at least my minimum payment of $393 and that ALL of it will go to principal. They said I just need to specify that I want it to go to principal...Ive heard of paying extra towards principal but not making every regular payment go towards principal. 

Im wondering how this will affect my loan, Im planning on keeping the car until October then trading it in so that would be great considering that I all my payments are going right towards my balance. Just looking for a little feedback before I go and pay all this money towards principal for the next 10 months then learn that I screwed up when I go to trade it in. Loan is through Crescent Bank & Trust BTW. They also agreed to take my 3 previous payments and change them over to principal only payments. So where does the interest aspect fit in to all this?

 

Thanks!


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StartingOver10
Posts: 4,063
Registered: ‎03-06-2010
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Re: Principal ONLY Payments Question...

[ Edited ]

You are right to be skeptical. I never heard of a loan without interest. What does your note say, in writing, about principal and interest allocations? It should specify. It's possible the CSR doesn't understand your question. I know you can specify, as you said earlier, principal payments in addition to the normal payment. But not principal payments in lieu of interest.

 

(Edit: this is different from a zero interest loan that is offered on new autos from car dealerships. I have never seen a traditional simple interest loan change from a regular amortization schedule over 72 months to a principal only payment option with no interest. Your loan docs that you signed are the loan terms. In order to change loan terms you have to refinance or have a written modification of the existing terms)

Member
pinned388
Posts: 13
Registered: ‎09-20-2012
0

Re: Principal ONLY Payments Question...

I will have to review the paperwork a little further tomorrow but I know it says that the total finance charge for the loan is around $11,000.

 

Something else thats a bit unrelated is that my interest rate on the loan paperwprk says its 18.00% but on my credit reports it says my interest is 18.9% any idea why the difference?  


Starting Score: 467 Equifax - 507 Transunion - 510 Experian (all on 07/2012)
Current Score: 610 Equifax - 631 Transunion - 610 Experian (as of 01/2013)
Goal Score: 690+ By July 2013
You CAN polish a turd, it just takes a LOT of wax!!!


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Senior Contributor
StartingOver10
Posts: 4,063
Registered: ‎03-06-2010
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Re: Principal ONLY Payments Question...

No, the note rate should match the rate on your cr report. Did your payment change at all from the time it was issued? Definately check your signed loan paperwork. Something doesn't sound quite right.

Member
pinned388
Posts: 13
Registered: ‎09-20-2012
0

Re: Principal ONLY Payments Question...

No payment is the same 


Starting Score: 467 Equifax - 507 Transunion - 510 Experian (all on 07/2012)
Current Score: 610 Equifax - 631 Transunion - 610 Experian (as of 01/2013)
Goal Score: 690+ By July 2013
You CAN polish a turd, it just takes a LOT of wax!!!


Take the FICO Fitness Challenge
Regular Contributor
ImprovingYouth
Posts: 154
Registered: ‎09-21-2012
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Re: Principal ONLY Payments Question...


pinned388 wrote:

Heres some basic loan info to begin with:

 

72 month auto loan

18% interest

Loan amount $17,247 (current balance $16,063)

Monthly payment $393

Opened loan Oct 2012 & paid 3 payments so far.

 

 

Okay I called the bank today just to find out the payoff amount and during the 45 minute phone call I learned that I can make principal only payments every month for at least my minimum payment of $393 and that ALL of it will go to principal. They said I just need to specify that I want it to go to principal...Ive heard of paying extra towards principal but not making every regular payment go towards principal. 

Im wondering how this will affect my loan, Im planning on keeping the car until October then trading it in so that would be great considering that I all my payments are going right towards my balance. Just looking for a little feedback before I go and pay all this money towards principal for the next 10 months then learn that I screwed up when I go to trade it in. Loan is through Crescent Bank & Trust BTW. They also agreed to take my 3 previous payments and change them over to principal only payments. So where does the interest aspect fit in to all this?

 

Thanks!


If it sounds too good to be true, that's because it is. I would expect that interest is just being added to the back end of your loan, essentially doing the same thing as just paying the interest on the front end.

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MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: Principal ONLY Payments Question...

+1, the interest is still there somewhere.
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