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New Member
verian
Posts: 1
Registered: ‎04-15-2008

principle v/s intrest

every month i pay 50.00 extra on my car note and than get the bill in the mail later to find out that they always applt the money to th intrest instead of the principle can i tell them that i want the money to be allpied tgo the principle what should i do?
Established Contributor
Takunda1
Posts: 512
Registered: ‎06-08-2007

Re: principle v/s intrest



verian wrote:
every month i pay 50.00 extra on my car note and than get the bill in the mail later to find out that they always applt the money to th intrest instead of the principle can i tell them that i want the money to be allpied tgo the principle what should i do?


 
Trick of the trade. Most financing companies do this. You will find that there is a separate address to send extra payments. If you send it all at once on one check or electronically it is just considered extra payment towards your next months payment. At Capital One, our contract states that if you pay over your monthly without specifying that the extra should go to principle only, we will apply the funds to the next three months payments including interest, then the remainder is applied only to interest.
 
Do this: Pay your monthly bill as you do. Call in the the $50 payment & tell the rep that you want that $5) applied only to principle.  Hope that helps :-)

Valued Contributor
ivyalmighty
Posts: 1,451
Registered: ‎03-19-2008

Re: principle v/s intrest

My parents got duped by this on their mortgage, as well, for years. If you send extra, you have to note in giant clear letters 'APPLY TO PRINCIPLE'. If you pay by check, I would send two separate checks --one for reg pmt due, and a separate one for that $50 with the "For" section of the check notated with the apply to principle.
Either that, or call and make the extra payment with the CSR applying it to principle. It's a stinky trick.
Valued Contributor
1111mel
Posts: 1,060
Registered: ‎02-13-2008

Re: principle v/s intrest

It actually all depends on the lender.  You need to specifically ask them how to make additional principal payments.
 
My current loan I have to send a separate check to a separate address with the "principal prepayment" on it.
 
My loan prior to that would break out the additional payment automatically.  If I sent an extra payment they would break it out....for example if my standard payment was due the 15th and they received another check on the 25th they would break out the additional payment to pay for the 10 days of interest that accrued then the rest went to principal. 
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Contributor
demo18c
Posts: 79
Registered: ‎03-06-2008

Re: principle v/s intrest

With Americredit I told them to apply to princinple. With Wells Fargo Mortgage they automatically applied to principle.

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Senior Contributor
MattH
Posts: 3,245
Registered: ‎04-03-2008

Re: principle v/s intrest



demo18c wrote:
With Americredit I told them to apply to princinple. With Wells Fargo Mortgage they automatically applied to principle.





Yep, Wells Fargo automatically applies my extra payments to principal, and until I paid off my car loan Chase Auto Finance applied my extra payments to the principal. As others have noted, this varies among lenders so be sure and check the fine print on your statements. Also, keep track of the principal to make sure it is going down as it should be.

In this area, as with many other aspects of lending, it does seem like the more "prime" the borrower the better lenders treat him or her, whereas "subprime" borrowers are much more likely to get tripped up by abuse of fine print by the lenders.

The Mortgage Professor has some spreadsheets that can be used for such calculations:
http://www.mtgprofessor.com/spreadsheets.htm

And here are some general discussions on the Prof's website:
http://www.mtgprofessor.com/mortgage_payments_1.htm

Note: the Mortgage Professor has very little to say about auto loans, but I don't know of any site with better calculation tools. Be aware that mortgage lenders usually do the interest calculation differently from how most auto and credit card lenders do it: usually on a mortgage so long as the payment arrives on time or within the grace period, the interest will be exactly the same as it would be if the payment arrived exactly on the due date, whereas with most auto loans the day of arrival affects the calculations. Read the site and your contract closely.
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Frequent Contributor
nathan
Posts: 411
Registered: ‎04-18-2007

Re: principle v/s intrest

Good idea for paying more than the minimum. How i do mine is that i transfer $10.00 every day from my checking to my auto loan account and this means an extra $300 per months. I was mad why i didn't think of this earlier. Mine is pretty easy to do because my cu, navyfed displays all your accounts on one page and you can transfer money any time you wish. I just noticed that making such extra payments will reduce my loan months by half and save me kk on interest and take away my negative equity. on some good days i transfer even up to 40.00 and i plan to do this for 18 mos to gain some equity and trade in the car and get one with a better interest rate. i hope this helps. if you are in an upside down situation and can afford to spare 10 bucks a day, do it.

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