topic Interesting and confusing...........can someone expalin? in General Credit Topics

Interesting and confusing...........can someone expalin?

Anonymous — Sat, 29 Aug 2009 00:04:54 GMT

I have a 10% car loan, balance of $12908. In June I made the payment for Sept, putting me 3 months ahead. In July I didn't make a payment, but in Aug I made a payment, which was for Oct. I paid $500, they charged me $268 in interest because the guy explained to me that the interest had "accrued" since my last payment. So, my question is: if July's payment had already been paid, how can the interest accrue on a payment that had already been paid---------especially if the interest for the paid month was about $108? They can turn around and charge me $268 in interest. His explanation of "we don't take the interest out of the payment until that month actually happens" confuses the heck out of me!!! I take my balance figure out the interest for said balance and send in that amount plus the amount I should see taken off the balance. So what they essentially can do is charge me 25% for July, even though thay payment had been made 3 months in advance? My formula had been exactly right on until I didn't make a payment in July. Can someone explain this?

Re: Interesting and confusing...........can someone expalin?

llecs — Sat, 29 Aug 2009 05:50:42 GMT

Read your contract, but generally you can't payments month in advance. Any excess that you pay would go towards the principal.

Re: Interesting and confusing...........can someone expalin?

Anonymous — Sat, 29 Aug 2009 16:47:32 GMT

Thanks for the reply. My mortgage works just like you said-----no matter how much extra I pay, my statement always says the next payment is due the next calendar month, and the amount does not change (I have a fixed int rate). This car loan, even though I have a fixed int rate, always comes back with a different amount due. They subtract the extra amount from the following month(s), and the due date is never the next calendar month. The statement from this last Aug payment says: Next payment due 11/14, amount due $493. My reg pymnt is $498. In Sept if I send in $643, the statement will read: next payment due 12/14, amount due $348, regular pymnt $498 minus $150-------so that's why I said I was"ahead". I mean, if the next payment is not due until Nov, I can't but help think that Sep and Oct already have been paid. It just irks me that they charged me 150% of the interest for July even though I already made the payment "ahead" of time. Again, thanks for they reply, and I'll just chalk this one up to my "credit education".

Re: Interesting and confusing...........can someone expalin?

Anonymous — Sat, 29 Aug 2009 17:39:16 GMT

many people get confused with car laons as they compare them to their revolving credit accounts.

There is no comparison between the two.

Car loans are simple interest loans, with fixed terms. Your payments amortize out.

You are NOT paying ahead. paying ahead and then skipping a payment is actually hurting you.

Interest accrues daily on your loan, even for time periods where you skip a payment.

Interest accrues daily on your car loan, on the pricipal left owing each day. Which is why making multiple payments a month (2 times a month plus) actually can pay your loan off faster as there are is less interest accrueing then originally contracted.