Avoiding auto loan interest rate?

[Anonymous]

Ok, like many,my auto loans are on auto pay. Every month I get my bank statement and I always put it in the burn pile for the weekend. (I burn my important/confidential paperwork). I never go thru it and check things. Well I did this recently for curious reasons. I didn't realize I was paying almost $200 month in interest!! And that's for my one loan. The other automotive loan is almost $150. Well I went to my Credit Union website and read I can make weekly or bi weekly payments to pay off the loan sooner. I called my bank and had the auto pay removed and I'm going to start paying it weekly. With that said, my loans are due on the 24th and 25th. If for example,I paid them in full on the 10th, am I only paying my loan principle and approximately 15 days of interest? Someone please explain this to me. I'm not very good with calculations, but I'm good with money and budgeting. I'd like to apply more money each month towards principle, but how much Iv been paying the last 18 months in interest is crazy! Refinancing at the moment is not an option. I need a little more score to do that. Thanks everyone

[madmann26]

It comes down to what the interest rate is on the vehicles you have now.

Based on the $200 a month in interest that you said you were paying, the interest rate is quite high. Interest controls the payment. Sure, the price of the car has something to do with it but to get a lower payment (and keep the cars) you have 2 options:

1. Refinance at a lower rate

2. Ask your lender if they can lower the rate

Take me for example. I originally had my wifes car financed through NFCU at 14.79%. That payment was almost $600 per month. When my auto-enhanced scores came up to around 700, I got a membership through DCU and refinanced her car through them.

I kept the number of months financed the same (let's say I had 30 months left at NFCU. I kept that same 30 month term at DCU) but my interest rate went down to 1.99%.

That alone saved me $150 per month.

I pay bi-weekly. I pay about $18.50 of interest per MONTH. The rest goes to the principle.

[Anonymous]

Thanks for the info. I applied with DCU to refi my car. But was denied. They said the reason why is bc of slow pay. I pay what I'm required, plus about $20-$30 extra. Not much I know, but I throw what extra money I have when I can. Now,re reading my post. I might have exaggerated a little on the amounts a pay, so I apologize. I tried adding it up myself but i got confused. I have 2 loans. First one $16,500 @10.8% ($375 month payment)and the second $25,000@ 8%($535 month payment) Both 60 month terms. When I financed my first loan,I had a fico score of 457TU(no not a typo), and when I did the other loan,I was at a fico 615TU a year later. I called my bank lady to have them remove the auto pay yesterday, and it is now for manual payment. Can you help me figure out how much a month I'm paying in interest if I pay it on the due date? Also, for example,if I make my payment next week as scheduled on the 24/25th avid then I make another payment back to back, technically I should be a month payment ahead right? Does that beat the interest. Maybe I'm wording it wrong, but hopefully you get what I mean

[madmann26]

The 10.8% loan is $10.80 per $100.

The 8% loan is 8.00 per $100.

You can't beat interest. The bank will always get paid.

Even when you do a payoff, you pay 14 days of interest. Sure, you may get some of that back but it's minimal.

Extra payments you can put toward the principal but even a regular payment you'll pay interest.

[Anonymous]

I see. Well thank you for the clarification. I thought I was on to something big lol.

[Anonymous]

Only way is if you can get a 0% interest loan most time you won't get a loan like that unless it's in house financing and they doing a special on vehicle they trying to get rid of. If you wanna pay less on interest only way of doing it is paying your principal down.

[StartingOver10]

---

@Anonymous wrote:
@Anonymous for the info. I applied with DCU to refi my car. But was denied. They said the reason why is bc of slow pay. I pay what I'm required, plus about $20-$30 extra. Not much I know, but I throw what extra money I have when I can. Now,re reading my post. I might have exaggerated a little on the amounts a pay, so I apologize. I tried adding it up myself but i got confused. I have 2 loans. First one $16,500 @Anonymous.8% ($375 month payment)and the second $25,000@ 8%($535 month payment) Both 60 month terms. When I financed my first loan,I had a fico score of 457TU(no not a typo), and when I did the other loan,I was at a fico 615TU a year later. I called my bank lady to have them remove the auto pay yesterday, and it is now for manual payment. Can you help me figure out how much a month I'm paying in interest if I pay it on the due date? Also, for example,if I make my payment next week as scheduled on the 24/25th avid then I make another payment back to back, technically I should be a month payment ahead right? Does that beat the interest. Maybe I'm wording it wrong, but hopefully you get what I mean

---

Couple of comments:

1) I am glad to see you are taking control of your finances.

2) I am a proponent of manual payments because you have complete control over the day you pay.  I would suggest paying at least a couple days in advance of the due date when paying on line to allow time for the lender to process the payment.  Others here prefer automatic payments, but you can always use that as a back up system if you fail to pay.

3) If you want to pay "a month ahead" make two separate payments this month or when you can.  Make them full payments and continue to pay monthly thereafter and you will stay ahead. I do that with my installment loan - except I am generally two to three months ahead. You do pay less interest overall if your payments are ahead rather than behind and you don't ever have a late fee that way.  If you go to your lenders' website you can see the monthly allocation of interest and principal out of your payment and the remaining balance on your loan. At least it is that way with my lender, Chase.  However, they usually only update once per month.

4) Record keeping is critical. You need to keep your records in case the lender makes an error then you have the proof necessary to refute the error. It doesn't happen often, but it does happen. If you don't want paper records, keep pdf's of everything in a secure online file. JMO.