02-26-2013 04:21 PM
recently i made a personal loan to cancel my credit card debt. i asked the bank if a can make payments to the principal and they said yes.Yesterday i was going to pay the loan and theynow say that i can make payments to the principal that i only can make advanced payments and that payments are going to be in an account and when i wnat to cancel the loan they recalculate what i owe them that they .
the question i want to make another loan with another institution that let me do payments to the principal to pay this loan. right know the loan i did isnt reported in my credit. how this move hurt my credit right know i have 671 tu fico.
What you recommend in this case.
02-28-2013 10:37 AM - edited 02-28-2013 10:38 AM
Little hard to understand, but it appears you may have a rule of 78ths loan. Or in old terms an "add-on" loan. You can look at your loan documents, if they say:
"if you prepay this loan you may be entitled to a refund of part of the finance charges" then you have this type of loan. If so, pre-paying the loan to them is inadvisable, the money doesn't go to principal and reduce your interest expense. You would be better served throwing the money in something that will earn you a return.
If the documents say, "you will NOT be entitled to a refund of the finance charges" then you have a simple interest loan and any additional payments will go where you direct them either to principal or accrued interest if undirected. Either way, your principal is reduced faster and you incur less finance charge.
IF it is a rule of 78ths loan it is inadvisable to pay off with another loan. This will be a very expensive mistake.
02-28-2013 12:59 PM
sorry my english isn't. That well. Ok I revised. The loan contract and I didn't find any clause of repayments it only said if I pay the loan before the 5 years they charge 1% of the remaining balance. The thing is that I can't. Make payments to the principal I can only do advanced payments and they going to charge me more interest.
the thing I want to do it's to take another loan in a institution tha let me pay to the principal and cancel the loan I did last month that isn't reported in,my credit yet.
if I do that move how can affect my credit. Other than a credit enquiry.
03-01-2013 11:51 AM
If that is the case, then you do have a rule of 78'ths type loan which will result in you paying the interest twice if you pay it off with another loan. To verify, I would ask them point blank, what your payoff is or hopefully pull it off their online system? Then calculate what amount of interest you are being charged, should be the principal amount times your interest rate divided by 360 times the number of days outstanding.