topic Re: Questions about Paying Auto Loan & Interest Accumulated in Auto Loans

Questions about Paying Auto Loan & Interest Accumulated

72jnse — Fri, 26 Apr 2024 12:44:05 GMT

So for context

- I have an auto loan which does not have early payment penalties.

- I originally got the car with an interest rate of 15.86% at about 25,000

- My current prinicipal balance on my car is about 23700.

For the first month the daily interest was about 10.76 a day. So my first scheduled payment would've been 322 to interest and about 220 to the prinicipal. I decided to pay a week early and saw that only 260 went to interest and 280 went to principal.

This is the how contract words daily interest:

We will figure the Finance Charge on a daily basis at the Annual Percentage Rate on the unpaid part of the Amount Financed

So in theory I could reduce this finance charge paying faster and adding more on top of it.

This has me thinking if I pay a week early or every 2 weeks my entire car payment won't I be putting the majority into the principal and substantially less to interest?

Re: Questions about Paying Auto Loan & Interest Accumulated

Horseshoez — Fri, 26 Apr 2024 12:51:40 GMT

@72jnse wrote:
So for context
- I have an auto loan which does not have early payment penalties.
- I originally got the car with an interest rate of 15.86% at about 25,000
- My current prinicipal balance on my car is about 23700.

For the first month the daily interest was about 10.76 a day. So my first scheduled payment would've been 322 to interest and about 220 to the prinicipal. I decided to pay a week early and saw that only 260 went to interest and 280 went to principal.

This is the how contract words daily interest:
We will figure the Finance Charge on a daily basis at the Annual Percentage Rate on the unpaid part of the Amount Financed
So in theory I could reduce this finance charge paying faster and adding more on top of it.

This has me thinking if I pay a week early or every 2 weeks my entire car payment won't I be putting the majority into the principal and substantially less to interest?

I think you'll find unless you pay a week earlier than you did the previous time for every payment, the interest charges will revert to a more normal P/I split.

Re: Questions about Paying Auto Loan & Interest Accumulated

FlaDude — Fri, 26 Apr 2024 13:48:45 GMT

@Horseshoez wrote:
@72jnse wrote:

For the first month the daily interest was about 10.76 a day. So my first scheduled payment would've been 322 to interest and about 220 to the prinicipal. I decided to pay a week early and saw that only 260 went to interest and 280 went to principal.

This is the how contract words daily interest:
We will figure the Finance Charge on a daily basis at the Annual Percentage Rate on the unpaid part of the Amount Financed
So in theory I could reduce this finance charge paying faster and adding more on top of it.

This has me thinking if I pay a week early or every 2 weeks my entire car payment won't I be putting the majority into the principal and substantially less to interest?
I think you'll find unless you pay a week earlier than you did the previous time for every payment, the interest charges will revert to a more normal P/I split.

The amount of interest is based on the time between payments, not the absolute date the payment is made. I agree with @Horseshoez, if you make every payment a week early, the time between payments is one month, and you'll see the "normal" amount of interest. If you pay half a payment every two weeks, you'll be making an extra payment per year which will help pay off the loan faster, and of course as the balance goes down, the P/I split becomes more principal, less interest.

Re: Questions about Paying Auto Loan & Interest Accumulated

72jnse — Fri, 26 Apr 2024 14:19:45 GMT

By payment every 2 weeks, I mean a full payment. So 540 twice a month.

Re: Questions about Paying Auto Loan & Interest Accumulated

Horseshoez — Fri, 26 Apr 2024 14:23:28 GMT

Here is my rolling track of my payments:

Statement	Balance	Payment	Posted	New Bal	Interest
19-Oct-2022	$38,802.00	$0.00	N/A	$38,802.00	$0.00
15-Nov-2022	$38,802.00	$850.61	15-Nov-2022	$38,025.50	$74.11
15-Dec-2022	$38,025.50	$850.61	15-Dec-2022	$37,252.71	$77.82
15-Jan-2023	$37,252.71	$850.61	13-Jan-2023	$36,475.80	$73.70
15-Feb-2023	$36,475.80	$850.61	15-Feb-2023	$35,707.31	$82.12
15-Mar-2023	$35,707.31	$850.61	15-Mar-2023	$34,924.90	$68.20
15-Apr-2023	$34,924.90	$850.61	14-Apr-2023	$34,145.77	$71.48
15-May-2023	$34,145.77	$850.61	15-May-2023	$33,367.37	$72.21
15-Jun-2023	$33,367.37	$850.61	15-Jun-2023	$32,587.33	$70.57
15-Jul-2023	$32,587.33	$850.61	14-Jul-2023	$31,801.19	$64.47
15-Aug-2023	$31,801.19	$850.61	15-Aug-2023	$31,020.00	$69.42
15-Sep-2023	$31,020.00	$850.61	15-Sep-2023	$30,234.99	$65.60
15-Oct-2023	$30,234.99	$850.61	10-Oct-2023	$29,435.95	$51.57
15-Nov-2023	$29,435.95	$850.61	17-Nov-2023	$28,661.64	$76.30
15-Dec-2023	$28,661.64	$850.61	15-Dec-2023	$27,865.78	$54.75
15-Jan-2024	$27,865.78	$850.61	12-Jan-2024	$27,068.40	$53.23
15-Feb-2024	$27,068.40	$850.61	16-Feb-2024	$26,280.57	$62.78
15-Mar-2024	$26,280.57	$850.61	15-Mar-2024	$25,481.95	$51.99
15-Apr-2024	$25,481.95	$850.61	15-Apr-2024	$24,685.23	$53.89

Re: Questions about Paying Auto Loan & Interest Accumulated

FlaDude — Fri, 26 Apr 2024 14:26:26 GMT

@72jnse wrote:
By payment every 2 weeks, I mean a full payment. So 540 twice a month.

That would pay off the loan in less than half the original time so you would end up paying far less in total interest over the life of the loan than originally plannned. If you can afford to make those double payments, then go for it.

Re: Questions about Paying Auto Loan & Interest Accumulated

Horseshoez — Fri, 26 Apr 2024 14:31:24 GMT

Well that was fugly; this is better:

What is unsaid is my first payment was due 05-Dec-2022 and each subsequent due date is the 5th of every month; as you can see, I made my first payment nearly three weeks early (but roughly a month after I bought my Tacoma), and the interest portion of my payment was right in line with other months; had I paid on the actual due date I would have expected to have been charged about $115 in interest instead of the $74.11.

Re: Questions about Paying Auto Loan & Interest Accumulated

72jnse — Fri, 26 Apr 2024 15:29:04 GMT

The way I see this, is as long as you avoid paying every month, but instead aim for every 3 weeks.

You can in theory [ and hopefully in practice] be able to keep battling interest in a way that more and more progressively goes to principal.

Fun thinking about it. And mathematically if someone can afford it, another potential way to save money on interest.

Re: Questions about Paying Auto Loan & Interest Accumulated

Horseshoez — Fri, 26 Apr 2024 15:51:17 GMT

@72jnse wrote:
The way I see this, is as long as you avoid paying every month, but instead aim for every 3 weeks.
You can in theory [ and hopefully in practice] be able to keep battling interest in a way that more and more progressively goes to principal.

Fun thinking about it. And mathematically if someone can afford it, another potential way to save money on interest.

The thing about interest is not all interest rates are equal; in your case accelerating your payments will help pay down your balance quicker and reduce the interest you ultimately pay, in my case I have absolutely zero desire to pay down my loan any faster than I am. What is the difference? As alluded to above, it is the rate; I managed to snag a loan at 2.49% for 48 months, and yet I have savings and investments paying quite a bit more than that, so it would be dumb for me to put more money into paying down the loan. Your 15.86% interest rate strongly suggests you should either refinance to a lower rate or pay that sucker off as soon as possible.

Re: Questions about Paying Auto Loan & Interest Accumulated

72jnse — Fri, 26 Apr 2024 16:31:37 GMT

Oh yeah, I meant for people with credit like me.

Re: Questions about Paying Auto Loan & Interest Accumulated

Kforce — Sat, 27 Apr 2024 19:48:22 GMT

@72jnse wrote:
The way I see this, is as long as you avoid paying every month, but instead aim for every 3 weeks.
You can in theory [ and hopefully in practice] be able to keep battling interest in a way that more and more progressively goes to principal.

Fun thinking about it. And mathematically if someone can afford it, another potential way to save money on interest.

Yes however the majority of savings is because of the extra amount you are paying

per year, from paying early.

$23,700 @ 15.86% with 540/mo = 67 months and 11,984 interest loss.

$23,700 @ 15.86% with 540/ every 2 weeks = 24 months & 3,968 interest loss

(540 every 2 weeks = 26*540 = 14,040 /year = 14040/12 = 1,170/month payment equivalent

$23,700 @ 15.86% with 1,170/mo = 24 months and 4,067 interest

Paying two weeks early every month would saved 99 over 2 years, but the extra pay would

save 4+years and almost $8000

It is the extra money you are paying making the savings.

With your plan of paying one week early.

$23,700 @ 15.86% with 540 every 3 weeks =40 months and 6,742 interest.

52 weeks / 3 weeks = 17.33 payments year

(540*17.333 payments)/12 = 780/mo equivalent

Once a month payment of 780 = 40 months and $6,803 interest

The one week interest gain of ~$60 over 3 years.

If you give exact balance, payment $, rate and frequency of payment, I will post or

private message a full amortization table.

Amortization for 3 weeks, 15 days, what ever plan you want.

Re: Questions about Paying Auto Loan & Interest Accumulated

Kforce — Sun, 28 Apr 2024 18:45:18 GMT


Loan :	23700.00
Rate :	15.86 %
Pmt :	540.00
Pmt Period	3 - Weeks


Payment	T-Pmt	Princ	T-Princ	Int	T-Int	Balance	Pmt #

540.00	540.00	323.14	323.14	216.86	216.86	23376.86	1
540.00	1080.00	326.10	649.24	213.90	430.76	23050.76	2
540.00	1620.00	329.08	978.32	210.92	641.68	22721.68	3
540.00	2160.00	332.09	1310.41	207.91	849.59	22389.59	4
540.00	2700.00	335.13	1645.54	204.87	1054.46	22054.46	5
540.00	3240.00	338.20	1983.74	201.80	1256.26	21716.26	6
540.00	3780.00	341.29	2325.03	198.71	1454.97	21374.97	7
540.00	4320.00	344.42	2669.45	195.58	1650.55	21030.55	8
540.00	4860.00	347.57	3017.02	192.43	1842.98	20682.98	9
540.00	5400.00	350.75	3367.77	189.25	2032.23	20332.23	10
540.00	5940.00	353.96	3721.73	186.04	2218.27	19978.27	11
540.00	6480.00	357.20	4078.93	182.80	2401.07	19621.07	12
540.00	7020.00	360.46	4439.39	179.54	2580.61	19260.61	13
540.00	7560.00	363.76	4803.15	176.24	2756.85	18896.85	14
540.00	8100.00	367.09	5170.24	172.91	2929.76	18529.76	15
540.00	8640.00	370.45	5540.69	169.55	3099.31	18159.31	16
540.00	9180.00	373.84	5914.53	166.16	3265.47	17785.47	17

540.00	9720.00	377.26	6291.79	162.74	3428.21	17408.21	18
540.00	10260.00	380.71	6672.50	159.29	3587.50	17027.50	19
540.00	10800.00	384.20	7056.70	155.80	3743.30	16643.30	20
540.00	11340.00	387.71	7444.41	152.29	3895.59	16255.59	21
540.00	11880.00	391.26	7835.67	148.74	4044.33	15864.33	22
540.00	12420.00	394.84	8230.51	145.16	4189.49	15469.49	23
540.00	12960.00	398.45	8628.96	141.55	4331.04	15071.04	24
540.00	13500.00	402.10	9031.06	137.90	4468.94	14668.94	25
540.00	14040.00	405.78	9436.84	134.22	4603.16	14263.16	26
540.00	14580.00	409.49	9846.33	130.51	4733.67	13853.67	27
540.00	15120.00	413.24	10259.57	126.76	4860.43	13440.43	28
540.00	15660.00	417.02	10676.59	122.98	4983.41	13023.41	29
540.00	16200.00	420.83	11097.42	119.17	5102.58	12602.58	30
540.00	16740.00	424.68	11522.10	115.32	5217.90	12177.90	31
540.00	17280.00	428.57	11950.67	111.43	5329.33	11749.33	32
540.00	17820.00	432.49	12383.16	107.51	5436.84	11316.84	33
540.00	18360.00	436.45	12819.61	103.55	5540.39	10880.39	34

540.00	18900.00	440.44	13260.05	99.56	5639.95	10439.95	35
540.00	19440.00	444.47	13704.52	95.53	5735.48	9995.48	36
540.00	19980.00	448.54	14153.06	91.46	5826.94	9546.94	37
540.00	20520.00	452.64	14605.70	87.36	5914.30	9094.30	38
540.00	21060.00	456.79	15062.49	83.21	5997.51	8637.51	39
540.00	21600.00	460.97	15523.46	79.03	6076.54	8176.54	40
540.00	22140.00	465.18	15988.64	74.82	6151.36	7711.36	41
540.00	22680.00	469.44	16458.08	70.56	6221.92	7241.92	42
540.00	23220.00	473.74	16931.82	66.26	6288.18	6768.18	43
540.00	23760.00	478.07	17409.89	61.93	6350.11	6290.11	44
540.00	24300.00	482.44	17892.33	57.56	6407.67	5807.67	45
540.00	24840.00	486.86	18379.19	53.14	6460.81	5320.81	46
540.00	25380.00	491.31	18870.50	48.69	6509.50	4829.50	47
540.00	25920.00	495.81	19366.31	44.19	6553.69	4333.69	48
540.00	26460.00	500.35	19866.66	39.65	6593.34	3833.34	49
540.00	27000.00	504.92	20371.58	35.08	6628.42	3328.42	50
540.00	27540.00	509.54	20881.12	30.46	6658.88	2818.88	51

540.00	28080.00	514.21	21395.33	25.79	6684.67	2304.67	52
540.00	28620.00	518.91	21914.24	21.09	6705.76	1785.76	53
540.00	29160.00	523.66	22437.90	16.34	6722.10	1262.10	54
540.00	29700.00	528.45	22966.35	11.55	6733.65	733.65	55
540.00	30240.00	533.29	23499.64	6.71	6740.36	200.36	56
202.19	30442.19	200.36	23700.00	1.83	6742.19	0.00	57

Re: Questions about Paying Auto Loan & Interest Accumulated

dunn2500 — Mon, 29 Apr 2024 00:54:50 GMT

pay off as much of the loan as fast as you can and refinance when your score reaches a level to reduce that APR substantially

i had a 17% rate and in 5 or 6 months refinanced to cut it by 10% down to 7%....

refinancing as quick as possible would be my goal