topic Re: Principal payment in Auto Loans

Principal payment

Pony4her — Mon, 06 Jan 2025 02:41:17 GMT

Hello all. Looking to trade my Mercedes Benz this spring, balance is $42k, trade in value is $26k (yes, negative equity). Question, I have $10k; should I apply to principal now or keep saving and just pay the difference at trade in? I do not want to carry any negative equity when I trade. Thanks in advance!

Re: Principal payment

FlaDude — Mon, 06 Jan 2025 20:09:34 GMT

Paying now would save you some interest so would help a little on reducing your negative equity.

Re: Principal payment

Kforce — Tue, 07 Jan 2025 00:22:34 GMT

@Pony4her wrote:
Hello all. Looking to trade my Mercedes Benz this spring, balance is $42k, trade in value is $26k (yes, negative equity). Question, I have $10k; should I apply to principal now or keep saving and just pay the difference at trade in? I do not want to carry any negative equity when I trade. Thanks in advance!

To calculate a real answer would require a few additional numbers.

Your loan interest rate and monthly payments and year, model of the MB for value tables.

Then one could calculate the savings by a 10k payment at x months down the road, or at what point you will be right side up.

Unless you have super low interest, @FlaDude is correct, the sooner the better.

If you want time frame or savings numbers you need to give us more info.

This is the problem with long term 100%+ loans.

Most are upside down for more than half the loan.

Re: Principal payment

Pony4her — Sat, 11 Jan 2025 00:38:16 GMT

@Kforce wrote:
@Pony4her wrote:
Hello all. Looking to trade my Mercedes Benz this spring, balance is $42k, trade in value is $26k (yes, negative equity). Question, I have $10k; should I apply to principal now or keep saving and just pay the difference at trade in? I do not want to carry any negative equity when I trade. Thanks in advance!
To calculate a real answer would require a few additional numbers.
Your loan interest rate and monthly payments and year, model of the MB for value tables.
Then one could calculate the savings by a 10k payment at x months down the road, or at what point you will be right side up.

Unless you have super low interest, @FlaDude is correct, the sooner the better.

If you want time frame or savings numbers you need to give us more info.
This is the problem with long term 100%+ loans.
Most are upside down for more than half the loan.

Thank you for responding.
Interest rate 15.25 (former careless credit days), now my scores are all 715-730.

Payment is $946 per month

2021 Mercedes Benz 300 GLC

Trade in Value $26k

I will be trading this car in April, which gives me time to save the remaining amount needed after trade credit; just gauging what could be the outcome with now making a $10k lump towards principal.

Re: Principal payment

Kforce — Sat, 11 Jan 2025 02:41:56 GMT

@Pony4her wrote:
Thank you for responding.
Interest rate 15.25 (former careless credit days), now my scores are all 715-730.
Payment is $946 per month
2021 Mercedes Benz 300 GLC
Trade in Value $26k

I will be trading this car in April, which gives me time to save the remaining amount needed after trade credit; just gauging what could be the outcome with now making a $10k lump towards principal.

Without making a 10k extra payment.

It would take 13 months to have a remaining balance of 36k less your 10k for a 26k cross out.

The interest cost would be $6,511.

If you use a 10k payment now, you would hit a balance of 26k at 10 months.

Interest loss of $3,747

Putting 10k in soon will save > $2,800 and a couple of months time.

April without extra payment you will still owe ~ $40,300 with 10k pmt $29,800

Will save ~$600 over the next 4 months with the 10k payment

Re: Principal payment

Pony4her — Sun, 12 Jan 2025 10:53:19 GMT

@Kforce wrote:
@Pony4her wrote:
Thank you for responding.
Interest rate 15.25 (former careless credit days), now my scores are all 715-730.
Payment is $946 per month
2021 Mercedes Benz 300 GLC
Trade in Value $26k

I will be trading this car in April, which gives me time to save the remaining amount needed after trade credit; just gauging what could be the outcome with now making a $10k lump towards principal.
Without making a 10k extra payment.
It would take 13 months to have a remaining balance of 36k less your 10k for a 26k cross out.
The interest cost would be $6,511.
If you use a 10k payment now, you would hit a balance of 26k at 10 months.
Interest loss of $3,747

Putting 10k in soon will save > $2,800 and a couple of months time.

April without extra payment you will still owe ~ $40,300 with 10k pmt $29,800
Will save ~$600 over the next 4 months with the 10k payment

Owe $45k

Cash on hand now, $10k to go towards prin.

Trade in value $26k

By April 2025, I'll have an additional $12k saved = am I safe to trade in April?

Re: Principal payment

Kforce — Sun, 12 Jan 2025 19:00:04 GMT

@Pony4her wrote:
Owe $45k
Cash on hand now, $10k to go towards prin.
Trade in value $26k
By April 2025, I'll have an additional $12k saved = am I safe to trade in April?

Start: 45000

Rate: 15.250 %

Pmt : 946.00

Payment Principal Interest Balance yyyy/mm #

---------------------------------------------------------------------

45000 2025 1 0 start

946.00 374.12 571.88 44625.88 2025 1 1

10,000 10,000 0 34645.88 2025 2 1 End Jan (reg +10k)

946.00 505.72 440.28 34139.28 2025 3 2

946.00 512.15 433.85 33627.13 2025 4 3

946.00 518.66 427.34 33108.47 2025 5 4 April after pmt

--------------------------------------------------------------------

Remaining Balance 33108.47 April with 10k extra in Jan

946.00 525.25 420.75 32582.75 2025 5 5 May

946.00 531.93 414.07 32050.82 2025 6 6

946.00 538.69 407.31 31512.13 2025 7 7

946.00 545.53 400.47 30966.60 2025 8 8

946.00 552.47 393.53 30414.13 2025 9 9

946.00 559.49 386.51 29854.64 2025 10 10 Oct

---------------------------------------------------------------------

This gives your balance monthly with a 10k extra payment this month.

Depending on real trade in value and your extra funds outside the 10k payment,

and exact extra money needed for the fees, tax's, what ever other stuff.

If you have an additional 3k a month going to extra savings + 10k in hand you should be in excellent shape

by April

33k - 26k = -7000 on car April

With 12k in savings you should be able to pay off and pay tax's and lice, etc.

Every month you are paying down the car by ~$500

PS: Putting the 10k extra payment will save money no mater what point in time you

trade in/up. Saving > $130 /mo in interest every month

Re: Principal payment

FicoMike0 — Sun, 12 Jan 2025 20:36:53 GMT

If you can save $12k by apr, you'd be better off putting most of that toward the principle as well.

Id be looking at trying to get a lot lower rate than 15% on the new loan. As @Kforce points out, you're paying more in interest than for the car right now.

Re: Principal payment

Kforce — Sun, 12 Jan 2025 21:38:35 GMT

@FicoMike0 wrote:
If you can save $12k by apr, you'd be better off putting most of that toward the principle as well.
Id be looking at trying to get a lot lower rate than 15% on the new loan. As @Kforce points out, you're paying more in interest than for the car right now.

Yes $10,000 January and $4,000 a month pmts for next 3 months, would save another $400 interest and have the vehicle balance of ~$24,200 after the April payment.

With 4k payments the car would be paid off in October.

< 10 payments

Re: Principal payment

Pony4her — Mon, 13 Jan 2025 05:54:04 GMT

@Kforce wrote:
@FicoMike0 wrote:
If you can save $12k by apr, you'd be better off putting most of that toward the principle as well.
Id be looking at trying to get a lot lower rate than 15% on the new loan. As @Kforce points out, you're paying more in interest than for the car right now.
Yes $10,000 January and $4,000 a month pmts for next 3 months, would save another $400 interest and have the vehicle balance of ~$24,200 after the April payment.

With 4k payments the car would be paid off in October.
< 10 payments

That's the plan which is why I won't take any negative equity on top of a new car and my scores currently are 715-720 and climbing (just refreshed) to allow a better interest rate.

Should I apply the $10k now (towards principal) and $4k (each month for the next 3 months towards principal) or just wait until April and apply the full $22k towards principal? Thoughts?

Re: Principal payment

Pony4her — Mon, 13 Jan 2025 05:55:35 GMT

@Kforce wrote:
@Pony4her wrote:
Owe $45k
Cash on hand now, $10k to go towards prin.
Trade in value $26k
By April 2025, I'll have an additional $12k saved = am I safe to trade in April?

Start: 45000
Rate: 15.250 %
Pmt : 946.00

Payment Principal Interest Balance yyyy/mm #
---------------------------------------------------------------------
45000 2025 1 0 start
946.00 374.12 571.88 44625.88 2025 1 1
10,000 10,000 0 34645.88 2025 2 1 End Jan (reg +10k)
946.00 505.72 440.28 34139.28 2025 3 2
946.00 512.15 433.85 33627.13 2025 4 3
946.00 518.66 427.34 33108.47 2025 5 4 April after pmt
--------------------------------------------------------------------
Remaining Balance 33108.47 April with 10k extra in Jan

946.00 525.25 420.75 32582.75 2025 5 5 May
946.00 531.93 414.07 32050.82 2025 6 6
946.00 538.69 407.31 31512.13 2025 7 7
946.00 545.53 400.47 30966.60 2025 8 8
946.00 552.47 393.53 30414.13 2025 9 9
946.00 559.49 386.51 29854.64 2025 10 10 Oct
---------------------------------------------------------------------

This gives your balance monthly with a 10k extra payment this month.
Depending on real trade in value and your extra funds outside the 10k payment,
and exact extra money needed for the fees, tax's, what ever other stuff.

If you have an additional 3k a month going to extra savings + 10k in hand you should be in excellent shape
by April

33k - 26k = -7000 on car April
With 12k in savings you should be able to pay off and pay tax's and lice, etc.
Every month you are paying down the car by ~$500

PS: Putting the 10k extra payment will save money no mater what point in time you
trade in/up. Saving > $130 /mo in interest every month

Should I apply the $10k now (towards principal) and $4k (each month for the next 3 months towards principal) or just wait until April and apply the full $22k towards principal? Thoughts?

Re: Principal payment

Kforce — Mon, 13 Jan 2025 18:04:14 GMT

@Pony4her wrote:
Should I apply the $10k now (towards principal) and $4k (each month for the next 3 months towards principal)
or just wait until April and apply the full $22k towards principal? Thoughts?

Every $ you pay early saves interest lost.

Therefore it saves money to pay more every month than save it and pay at the end.

However money spent is not there for an emergency or if you change your plan.

By paying all you can this month and again everything you can each up coming month will save you money.

10k now and 4k/mo will save ~$400, pay more save more, pay less save less.

Only advantage to not pay early is to have the money for something else.

My answer would be "Yes", start paying down the loan with extra funds.

Re: Principal payment

Pony4her — Mon, 13 Jan 2025 23:26:37 GMT

@Kforce wrote:
@Pony4her wrote:
Should I apply the $10k now (towards principal) and $4k (each month for the next 3 months towards principal)
or just wait until April and apply the full $22k towards principal? Thoughts?
Every $ you pay early saves interest lost.
Therefore it saves money to pay more every month than save it and pay at the end.
However money spent is not there for an emergency or if you change your plan.

By paying all you can this month and again everything you can each up coming month will save you money.
10k now and 4k/mo will save ~$400, pay more save more, pay less save less.
Only advantage to not pay early is to have the money for something else.

My answer would be "Yes", start paying down the loan with extra funds.

Thank you for your wisdom; it was greatly appreciated! TY!