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Can creditor change how past payment was applied?

Senior Contributor

Can creditor change how past payment was applied?

Say you've got a credit card with a monthly minimum payment of $50 or a loan with a monthly payment of $50.  For the purposes of this discussion let's say they are at 0 interest (makes more sense with the CC, I know).  If you are in the habit of paying extra, say $200 (4X minimum) for the sake of this discussion and all of a sudden one month you lose your job or for whatever reason know you can't make the $50 minimum, can you contact the creditor and have them change how a previous payment was applied... that is, apply less to a previous payment in order to apply more to a future payment?  I say take interest out of the equation as that could throw off the numbers.  Is this something that's a yes/no answer or would it vary by creditor/lender?

 

 

Message 1 of 6
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Established Member

Re: Can creditor change how past payment was applied?

For the car loan, you can pay for months in advance and not have to pay over those months. For credit cards, I've never heard of this being allowed, at least not retroactively. Couldn't hurt to ask I guess.

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Message 2 of 6
Established Contributor

Re: Can creditor change how past payment was applied?

Pretty much what Sythic said. Most loans seem to apply overpayments to the next month's or months' bill(s) unless you have arranged for overpayments to go to principle. If your overpayments go to principle, you'd still be on the hook for the next bill.

I've noticed with a few of my cards that if I pay twice before the next bill even cuts that my next bill will have a $0 minimum due. This happens to me all the time with USAA for some reason. Even when I carry a balance my minimum payments are almost always $0.

If they won't rearrange the application of your overpayments they may be willing to pause your payments due for a short time while you get sorted (while still accruing interest of course).

If this is a current situation I would recommend calling your creditors to see what they can do for options hypothetically - payment protections plans, etc. BUT don't tell them you've lost your job yet as there are some that freak out and will close your accounts and then all heck breaks loose. Just pretend you're one of those bored lonely folks that likes talking to CSRs and asking them every question you can think of about the weird things you read in your CC agreements (there's often options in there for some sort of protection plan for a small fee per $x amount of balance).

Good luck!
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Message 3 of 6
Valued Contributor

Re: Can creditor change how past payment was applied?


BrutalBodyShots wrote:

Say you've got a credit card with a monthly minimum payment of $50 or a loan with a monthly payment of $50.  For the purposes of this discussion let's say they are at 0 interest (makes more sense with the CC, I know).  If you are in the habit of paying extra, say $200 (4X minimum) for the sake of this discussion and all of a sudden one month you lose your job or for whatever reason know you can't make the $50 minimum, can you contact the creditor and have them change how a previous payment was applied... that is, apply less to a previous payment in order to apply more to a future payment?  I say take interest out of the equation as that could throw off the numbers.  Is this something that's a yes/no answer or would it vary by creditor/lender?

 

 


No, BBS I do not think they can do that. When someone pays extra it is applied to the principle, they can however move the due payment to the end of the scheduled payments to keep from showing a late payment. I have never heard of them doing more than 1 payment that way, but in theory they could. As a matter of a fact, my credit union allows shifting 1 monthly payment per year on all installment loans without penalty...they even advertise that feature on their loans. I know on a 0 interest loan there would be no interest anyway....unless you miss a payment, they will then go to the default interest rate. If I am not mistaken, by law, they can not remove previous overpayments to apply to future payments...even if they want to. They could if they wanted to, renew the loan, at the same terms as the previous loan and even get you some cash to make future payments if they wished to, but it would show up as a new loan. Could also do this...but no income could stop this.

 

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Message 4 of 6
Community Leader
Senior Contributor

Re: Can creditor change how past payment was applied?

There are lenders for whom overpayments are both immediately applied to the principle and at the same time count as having fulfilled your obligation to make future payments (for a period roughly proportional to the overpaid amount).

 

For example, with the Alliant $500 Share Secure loan (for 60 months), the monthly payment is a little over $9.  But most people here on the fourm choose to pay most of the $500 off in the first couple months.  That huge overpayment counts almost entirely as a payment on the principle, and thus after it is made the amount you are paying in interest per month is just pennies. 

 

But, at the same time, Alliant regards the overpayment as pushing back the next "payment due" by a huge chunk of time -- well over 4 years.

Message 5 of 6
Senior Contributor

Re: Can creditor change how past payment was applied?

Cool, good info everyone.

 

This didn't actually happen to me, it was just something I was thinking about the other day and wanted to know in sort of a "what if" situation.

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