double up on payments? will this work?

[rootpooty]

My case for example 2 years ago I got financed 272.28 for 72 months 8.1 apr. The financing company ALLY provides a statement every month and for the first year out of the 272 payment about 140 of it went to finance charge now its down to around 90. What would happen if I double up on payments? Will the additional 272 I send go to the principal or how would that work? I asked a friend of mine who works at my local bank and she said they might just see it as over payment and just apply it to next months payment and that banks do that so they don't lose money in interest.

[-Cain-]

I believe you can instruct the bank to apply the extra $272 to principal.

[andyaycw]

When I make my auto loan payments online with Chase, I see the option to specify any additional payment amount to go toward the principal balance. You should have a similar option with Ally.

[llecs]

Doing this to keep my mind active....

If your payments at $272.28 at 8.1% APR, then the original loan amount would have been $15,487 give or take a few (cheating via here). And if the loan amount is $15,487, then exactly two years later your principal balance is around $10,935 with a chunk of your payments going towards interest. Now I'm never exact in my speech and I realize that it may not be exactly 2 yrs later. There might be other fees in there from the past as well.

So, if your balance is around $10,935 you'll pay it off in another 4 years assuming you aren't late, defer any payments, etc. Cheating again via a different calculator, if you have 48 months remaining at a balance of $10,935, and you continue to make your payment as scheduled, but double up towards principal, then you'll pay it off 2 years and a month early saving $1,050 in interest in the process...give or take.

[pizzadude]

Check your loan agreement ~ it should state how additional payments are credited.

[rootpooty]

Wow your pretty good you nailed that one down to the tee!

[Anonymous]

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@-Cain- wrote:
I believe you can instruct the bank to apply the extra $272 to principal.

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+1

Check your loan agreement and it shouls specify about additional payments.

If they are not ready to apply the extra payment towards pricipal than set aside the double payment and pay the loan in one shot few months down the line.